Entry of Fox Corporation's Tubi to UK market has some scratching ...

Tubi, the free advertising-supported streaming service owned by Rupert Murdoch's Fox Corporation, has launched in the UK.

Promising British viewers more than 20,000 movies and TV episodes on demand, including content from all of the main Hollywood studios, Tubi - which with nearly 80 million monthly active users is the fastest growing US streaming service - is also offering what it describes as "a robust slate" of exclusive original programmes.

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A seemingly saturated market

The service joins an increasingly crowded UK market in which the likes of Netflix, Amazon Prime Video, Disney+ and Apple TV are already duking it out.

Sky, the parent of Sky News, owns a streaming service called Now TV while also offering a service called Sky Stream that enables customers to view original Sky content as well as Netflix, Apple TV, Amazon Prime Video, Paramount+ and Disney+ all in one place.

The legacy terrestrial TV broadcasters - the BBC, ITV, Channel 4 and Channel 5 - also all have their own streaming platforms and teamed up in April to launch a new service called Freely, which offers viewers the option to watch both live TV and on-demand content and which is widely expected over time to succeed Freeview, the digital terrestrial TV service.

So Tubi's entry to the UK market has got some scratching their heads.

Not only is the market seemingly saturated but production costs are rising, obliging the streamers to either raise subscription fees or rely on an increasingly smaller pool of advertisers.

A competitor to take seriously

But rivals would do well to take the new competitor seriously and not least because Tubi has already, in the US, shown a clean pair of heels to many of the businesses it will be competing with here.

Anjali Sud, chief executive of Tubi, said: "Tubi has spent the last decade honing our approach to vast, free and fun streaming in North America, and we feel that now is the perfect time to bring that recipe to UK audiences.

"We are launching with one of the largest and most diverse content libraries in the UK, designed to indulge viewers in everything from blockbusters to original stories to hidden gems.

"Most importantly, we're committed to listening to what resonates with UK fans, and bringing them more and more of what they love."

One of Fox's fastest-growing businesses

Tubi, which was acquired by Fox in 2020 for $440m, is one of Fox's fastest-growing businesses. Lachlan Murdoch, Fox's executive chair and chief executive, last year reportedly turned down an offer of $2bn for the operation.

In May, it enjoyed record audiences in the US, attracting more viewers than not only Disney+ but other streaming services including Peacock (which is owned by Comcast, the ultimate parent of Sky News), Max (the streaming service owned by Warner Bros Discovery and previously called HBO Max) and Paramount+, as well as free rivals such as Roku and Pluto TV.

Only YouTube was ahead of it among free advertising-supported video-on-demand services.

Why Brexit means it's launching in the UK

There are specific reasons why Tubi, which is currently available in the US, Canada, Mexico, Australia, New Zealand and a number of Central American countries, is targeting the UK market.

The first is regulation. Today is not actually a launch but, strictly speaking, a relaunch because Tubi was available in the UK and Europe until 2018 - when it was forced to withdraw due to the EU's General Data Protection Regulations (GDPR).

Now the UK has left the EU, Tubi has been able to return to the UK.

The second is the shape of the market.

Targeting younger audiences and ethnic minorities

Tubi believes there are parts of the UK market, particularly younger audiences and ethnic minorities, which are not sufficiently catered for by existing streamers and particularly by big names like the BBC and ITV that have traditionally targeted mass audiences.

Ms Sud told the industry publication Variety: "Similar to the US, there's been a natural need to revert to the median, to focus on mass appeal, and that's very hard when you have such a diverse melting pot of a country, with incredibly diverse tastes and perspectives."

Accordingly, Tubi is seeking to "deliver delight beyond the monoculture" in its words, offering "new areas of discovery - from Bollywood and Nollywood to Arthouse Cinema".

That similarity between the US and UK markets is a major reason why Fox is confident Tubi can take off in the UK.

While competition for subscribers in the US has intensified, leading to an uptick in so-called "cord-cutting" - the cancellation of pay-TV services or subscription channels - Tubi is seen as being a beneficiary, partly because it is free and partly because it appeals to so-called 'cord nevers', mainly millennials, who have never subscribed to satellite or cable TV services and who instead use online streaming services.

Steve Tomsic, Fox's chief financial officer, told an audience of investors in May that this made it particularly appealing to advertisers: "60% of Tubi users are cord-cutters or cord nevers…Tubi… services those advertisers outside of that ecosystem.

"And then the other piece to Tubi, which is really great, is that a lot of people confuse Tubi as being sort of this passive fast channel sort of that just is on rotation in the background in a person's household.

"It's not - 90% of Tubi consumption is VOD (video on demand) where it's a real lean forward experience. People have deliberately chosen the title and watch through it."

On that basis, the service appears to be gunning most aggressively for those streamers using advertising-supported services to keep down the price of their subscriptions, since a big part of Tubi's offer to advertisers is being able to appeal to younger and more ethnically diverse audiences in particular.

Both Netflix and Amazon Prime TV - the latter via a service called Freevee - offer cheaper subscription options for customers prepared to accept advertising.

Questions of content, competition and advertising

Yet there are questions.

Tubi has been able to establish a strong position in markets like the US because it launched more than a decade ago - long before the likes of Warner Bros, Disney and Paramount launched their own streaming platforms. Here, it is coming from behind.

Another is how the competition responds.

Amazon in particular has proved adept at undercutting its competitors across a whole range of services. Among these is TV advertising, where it has created headaches for Netflix, whose ad-supported service is thought in the industry to have brought in fewer subscribers than hoped.

A third question is the content itself.

Tubi's sales pitch is that it will be offering something UK audiences have not seen before but that is partly because it is never going to be able to produce strong local content of the type produced by the BBC, ITV and others. It is something of a bet that it can build a profitable audience on the back of Bollywood and Nollywood movies.

And, biggest of all, is the advertising market itself.

Tubi is still building advertising revenues because it is still building its subscriber base. As streaming channels mature, though, the danger is that their advertising sales growth slows.

Roku, a more mature business than Tubi, has at several points in recent years had to downgrade Wall Street's expectations for its ad revenues.

How it all pans out should make for fascinating viewing in its own right.

Ian King owns shares in Fox Corporation, Walt Disney Company and Comcast Corporation