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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Fox Corporation    FOXA

FOX CORPORATION

(FOXA)
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Fox, Comcast Pursue Takeovers of Ad-Supported Video Services

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02/21/2020 | 06:11pm EDT

By Lillian Rizzo, Joe Flint and Patience Haggin

Fox Corp. and Comcast Corp. are each in discussions to acquire advertising-supported video services, as entertainment giants increasingly look to offer free or low-cost alternatives for consumers who don't want to pay for streaming subscriptions.

Fox has expressed interest in acquiring Tubi, an ad-supported streaming service that carries reruns of television shows and movies, according to people familiar with the matter. The companies are discussing a deal that could be valued at north of $500 million, the people said.

Separately, Comcast's NBCUniversal is in advanced talks to acquire Vudu from retail giant Walmart Inc., according to people familiar with the discussions. Vudu allows consumers to buy or rent movies or shows and in 2016 launched a free, ad-supported service that includes thousands of movies and TV shows.

Almost all major entertainment companies, from Walt Disney Co. to AT&T Inc.'s WarnerMedia, have launched or are preparing ad-free subscription streaming services to compete with Netflix Inc. and Amazon.com Inc.

But several companies also see the need to offer free, ad-supported tiers to reach other consumers. A Wall Street Journal-Harris Poll survey last fall found that Americans are willing to spend an average of $44 monthly on streaming video to subscribe to an average of 3.6 services.

ViacomCBS Inc. outlined its streaming plans this week, saying its premium option will be Showtime, while a second option will be an expanded version of its CBS All Access subscription service. Other consumers will be able to access the ad-supported service Pluto TV, which predecessor company Viacom Inc. acquired last year for $340 million.

In December, the Journal reported that Comcast was in exclusive negotiations to acquire Xumo LLC, another ad-supported streaming platform.

Sony Corp. last year formed a joint venture with media company Chicken Soup for the Soul Entertainment Inc. to launch a beefed up version of its ad-supported platform, Crackle. Chicken Soup for the Soul took a majority stake in the streaming platform, now called Crackle Plus, while Sony remained an investor.

The boom in ad-supported video "was the missing piece in the streaming wars," said Bill Rouhana, chief executive of Chicken Soup for the Soul Entertainment. "It's no surprise that M&A activity is increasing dramatically in the sector."

Amazon's IMDb last year launched an ad-supported streaming service to complement the company's Prime subscription service.

Tubi would give Fox -- which owns the Fox broadcast network, Fox News and Fox sports networks, among other assets -- a platform with significant reach and a large customer base. Tubi said that in December it notched 25 million monthly active users. Fox could use the service as another home for content from its broadcast network as well as a promotional platform.

Fox Corp. and Wall Street Journal parent News Corp share common ownership.

Based in San Francisco, Tubi streams content from Warner Bros. Entertainment Inc., Paramount Pictures and Lions Gate Entertainment Corp. Its most popular titles include "Scooby-Doo," "New Jack City" and "Daddy Day Care." The service is available on streaming devices such as the Amazon Fire Stick, Apple TV and Roku, as well as Sony and Samsung televisions. Tubi is available in the U.S., Canada and Australia.

Vudu was acquired by Walmart in 2010 for more than $100 million.

The financial terms Walmart and NBCUniversal are discussing couldn't be learned. The discussions may not result in a deal, the people familiar with the talks said.

The talks come a few months before NBCUniversal launches a new streaming service, Peacock, which will include an ad-supported version for $4.99 a month and an ad-free tier for $9.99, as well as a more limited, free version with ads. The service will debut in April to Comcast and Cox Communications Inc. customers and to all consumers in July.

Vudu's ad-supported service would serve as a complement to Peacock, the people familiar with the talks said. The free service has recent titles such as "La La Land" and a large library of older ones like "Swingers," "The Karate Kid" and "Ace Ventura: Pet Detective."

Vudu's online movie-rental service would support NBCUniversal's movie-ticketing and rental business, Fandango Media LLC, which is said to have more than 30 million online and mobile monthly visitors.

Vudu's movie-rental business is said to be about seven times the size of Fandango's by revenue, according to another person close to the situation. Walmart says Vudu is installed on more than 100 million devices across the U.S.

In 2018 Walmart considered expanding its video-streaming ambitions by launching a subscription-supported service separate from Vudu, to compete with Netflix, but the company chose not to enter such a crowded, competitive market, said a person familiar with the situation.

If Comcast moves ahead with an acquisition of Xumo, it would be aligned more with the cable giant's Xfinity pay-TV platform, known as X1, as well as the company's streaming device, Flex, said a person familiar with the matter. The X1 cable box serves as a one-stop shop for Comcast pay-TV subscribers, since it includes both cable programming and access to numerous streaming applications such as Netflix.

Flex is targeted at cord cutters who remain broadband subscribers. Last year, Comcast began offering Flex to its broadband-only subscribers at no cost.

AT&T's HBO Max, which is launching a $14.99-a-month subscription offering in May, will offer a lower cost, ad-supported version at a later time.

Write to Lillian Rizzo at Lillian.Rizzo@wsj.com, Joe Flint at joe.flint@wsj.com and Patience Haggin at patience.haggin@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
APPLE INC. 8.72% 262.47 Delayed Quote.-10.62%
AT&T INC. 7.21% 29.44 Delayed Quote.-24.67%
COMCAST CORPORATION 6.72% 36.23 Delayed Quote.-19.44%
FOX CORPORATION 12.38% 25.06 Delayed Quote.-32.40%
LIONS GATE ENTERTAINMENT CORP. 9.81% 5.93 Delayed Quote.-44.37%
NETFLIX, INC. 5.03% 379.96 Delayed Quote.17.43%
NEWS CORPORATION 9.17% 8.93 Delayed Quote.-36.85%
SONY CORPORATION -0.98% 6260 End-of-day quote.-1.48%
VIACOM INC. 3.20% 24.22 Delayed Quote.0.00%
WALMART INC. 5.52% 126.07 Delayed Quote.6.08%
WALT DISNEY COMPANY (THE) 6.07% 99.58 Delayed Quote.-31.15%
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Financials (USD)
Sales 2020 12 396 M
EBIT 2020 2 327 M
Net income 2020 1 617 M
Debt 2020 3 350 M
Yield 2020 2,15%
P/E ratio 2020 8,61x
P/E ratio 2021 8,39x
EV / Sales2020 1,36x
EV / Sales2021 1,30x
Capitalization 13 539 M
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Average target price 36,43  $
Last Close Price 22,67  $
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Managers
NameTitle
Lachlan Keith Murdoch Co-Chairman & Chief Executive Officer
Keith Rupert Murdoch Co-Chairman
John P. Nallen Chief Operating Officer
Steven Silvester Tomsic Chief Financial Officer
Paul Cheesbrough Chief Technology Officer & President-Digital
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