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30 July 2020

Plex, Pluto TV steer LSG into linear-hybrid – attracting M&A attention?

Last week, Rethink TV, Faultline’s research arm, released its latest forecast, identifying that the pay TV barons have some serious competition on the horizon. These are free online video platforms, categorized as Long Form video services, Social Media platforms, and Gaming streaming platforms – LSG for short.

News this week is further proof of the sway towards free online video as two Long Form platforms, Plex and Pluto TV, expand their offerings. A fresh entrant into the OTT market, Plex has just launched over 80 FTA live channels on its platform, adding to its existing range of AVoD content.

Meanwhile, one of Plex’s prime competitors, Pluto TV, has landed its biggest distribution deal yet, partnering with Verizon Wireless – a vote of confidence in AVoD from a huge operator that is still yet to fully commit to OTT.

Both Pluto TV and Plex now integrate linear-style channels into platforms that are often mistaken for pure VoD. This week’s news is therefore illustrative of the blurry transition period that lies ahead as cord cutting takes place. AVoD services are going to be incorporating linear channels as they steer consumers away from traditional pay TV.

First up, Plex has – rather arrogantly – announced that it is onboarding live TV channels to its service. “Remember TV?” the press release opens with, before concluding, “We loved it because it was simple, and we hated it because it was simple.”

Yet after revelling in the antiquated quirks of the TV format, Plex reveals that it is “bringing it all back”, offering over 80 live channels to bolster its existing library of 14,000 movies and shows. The channels on offer include the likes of Reuters, Toon Goggles, Tastemade, fubo Sport Network and IGN TV, as well as channels dedicated entirely to specific shows – The Bob Ross Channel, for example.

Although lacking many of the big names seen at the likes of Pluto TV and Peacock, Plex is hoping that the offering will draw customers from outside the US. Unlike those competitors, 80% of the channels will be accessible globally.

Plex has rarely featured in Faultline, partly because it was never all that relevant. Called a ‘client server media player’, it provided a hub for user-owned digital media, allowing users to stream their own content collections from anywhere.

The company only made the transition to becoming an AVoD platform late last year, with the service going live in December 2019. Content is drawn from a range of publisher partnerships, including the likes of Warner Bros, Domestic Television Distribution, MGM and Lionsgate.

Plex is still a relatively small fish in the AVoD pond. Although the company has yet to publish any data regarding MAUs or monthly hours watched (MHW), it is unlikely past the low tens of millions. It told Variety in August 2019 that it had 20 million registered accounts, but this was before it became an AVoD service, and an account is not needed to watch the free content.

For some context, Plex’s closest competitors – the likes of Pluto TV, Tubi, Xumo and Crackle Plus – all host between 25 and 30 million MAUs. In terms of MHW, Tubi is the only one to make these figures public, with its users watching 163 million hours each month. We imagine that the other two are in the same ballpark.

Its worth remembering that Plex is still an independent company – an increasing rarity in the AVoD game. With its competition owned by the likes of ViacomCBS (Pluto TV), Disney (Tubi) and Chicken Soup for the Soul Entertainment (Crackle Plus), it is surely only a matter of time before Plex is acquired.

While many are already highly conscious of growing subscription fatigue among consumers in the SVoD market, it seems AVoD is a much younger and much more fluid game. There is still a lot of room for companies to jump aboard the service, before consolidation inevitably hits later down the line.

Elsewhere this week, AVoD conquered new ground in Pluto TV’s partnership with Verizon. The deal was inked back in May, but this week sees the service rolled out to customers. Verizon has 115 million wireless subs, but according to Deadline, both companies have said that Pluto TV will have access to customers in the tens of millions – not hundreds.

Verizon has always had a limited direct presence in OTT video – it is yet to own a platform of its own – and this partnership does little to change that. Rather, it is a vote of confidence in AVoD as a service that consumers genuinely want, as well as likely an effort on Verizon’s part to get its head round OTT.

Pluto TV has been integrating live linear content into its platform for a while now. Compared to Plex, its content partners are more up market, hosting the likes of Paramount Pictures, MTV, CBS, Comedy Central, and Nickelodeon.

The Pluto TV widget will be pushed to Verizon’s Fios TV One, Fios TV One Mini, VMS1100, and IPC1100 set tops. It will also be preinstalled on select Stream TV devices, Verizon co-branded Amazon Fire Sticks and Fire Cubes, and made available on the Android app store.

While we are still years off LSG surpassing the pay TV ecosystem, it is small movements such as these that will slowly edge LSG platforms like Pluto TV and Plex to the top of the video ecosystem.

Rethink TV’s latest forecast predicted that by 2025, LSG will be bringing in $171.5 billion in revenue, growing at a CAGR of 7.7%. This takes place alongside the decline of pay TV, which in a best-case scenario declines from $380 billion to $363 billion. Come 2030, the revenue gap will have closed considerably.