Fox earnings lifted by advertising revenue from free streaming service Tubi

Fox Corp.'s bet on its free, ad-supported streaming service Tubi appears to be paying off for the company. 

On Tuesday, the company reported earnings for its first fiscal quarter, noting that Tubi helped boost its advertising revenue. The service offers on-demand movies and TV shows, as well as channels that replicate the traditional pay-TV format.

"In a quarter when digital advertising revenue appeared to be under pressure, Tubi posted standout revenue growth of almost 30%," to about $165 million, said Fox CEO Lachlan Murdoch. 

Fox said its advertising revenue in the quarter was also propelled by political ads leading into the midterm elections. Overall, revenue for the period was up 5% from a year ago to $3.19 billion. 

On a call with investors, Murdoch said that Tubi's revenue for the first time surpassed the advertising revenue generated by Fox Entertainment "in a meaningful way." Driving that was the 50% increase in total viewing time, marking Tubi's highest ever quarterly viewership at 1.3 billion hours, Murdoch said. 

The boost in ad revenue from Tubi comes as Fox's linear TV networks have been hurt by cord-cutting, and as many fear a downturn in the advertising market due to economic headwinds and a potential recession.

Fox is among the media companies that acquired a free streaming service in recent years to boost advertising revenue as the streaming wars took off with subscription services such as Netflix and Walt Disney Co.'s Disney+. 

Fox bought Tubi in 2020 at an estimated valuation of $490 million. Comcast Corp. acquired Xumo that same year for an undisclosed amount, while Paramount Global acquired Pluto, a main competitor to Tubi, for $340 million in 2019. 

Paramount has premium streaming service Paramount+, which includes an ad-free and cheaper ad-supported options. But it has said in recent quarters Pluto's viewership continues to rise and add to its overall streaming growth. The company reports earnings on Wednesday.

Media companies have been scrambling to add more paying subscribers to their streaming platforms, with Netflix, Disney+ and Warner Bros. Discovery's HBO Max investing heavily in content budgets. More recently, they've also turned to cheaper subscription options that are supported by ads.

Meanwhile, services like Tubi and Pluto have quietly generated advertising revenue for media companies.

Fox management said Tubi was on track to continue growing revenue in the next quarter, adding that the company invested roughly $50 million in the streamer during the quarter. 

Murdoch called the investment "very modest" when compared with premium subscription streaming services. He added the company will continue to invest in Tubi, which it sees it as a "safe investment" that has the potential to become the winner in the free, ad-supported streaming category. 

Disclosure: CNBC is owned by Comcast Corp.