Reflections on a Thesis (and What’s Next for Streaming Content)

By Yelena Shkolnik

1 year ago almost to the day, when COVID rapidly descended on the US, a company called Tubi sold to Fox. I led our investment in Tubi in 2017 and had the incredible pleasure of supporting that company’s rapid growth as a board member. In just a few short years Tubi became a go-to entertainment solution for millions of households, a trajectory that was possible because of the incredible team behind it and its leader, Farhad Massoudi.

But this is not a post about that exit.

On this blog we enjoy sharing with you the thesis work we do internally. We have long enjoyed debating these ideas in our hallways (or on Zoom these days!), and it has been amazing to bring these to the blog and bring all of you into those conversations. But what’s really fun about committing these to the immortality of internet ink is being able to go back to them years later and find out how our beliefs bore out.

Outside of our enthusiasm to back this incredible team, our investment in Tubi was driven by a belief we had that in 2017 few others shared: that after all the cord-cutting dust had cleared, and despite the rise of so many great subscription platforms, ultimately ad-supported content would dominate residential entertainment. But Tubi’s story is also fascinating for sitting at the intersection of so many changes in media – the transition to streaming, consumption shifting from linear to on-demand, growing appetite for short form, cord cutting, personalization of media and many more.

Today I wanted to 1) look back at our thesis, 2) reflect on the prevailing beliefs when we made it and what’s happened since, and 3) highlight the bits of this thesis that haven’t borne out yet: how commercial entertainment will evolve, how challenges to the pay TV ecosystem create opportunities in sports and how critical cross-platform measurement will be.

One Trend Does Not Make an Investment Opportunity

I hear a lot of excitement about investing in categories when a disruption occurs. A new technology emerges, for example, that makes it cheaper to build something. While that alone can catalyze growth for some players, big bets are generally borne of multiple disruptions. A change in consumer preference that meets an adapting technology and often also an external disruption, now that’s worth betting on. A single force can create a trend, but generally one that everyone sees; a second can create a unique opportunity and a third can ensure your bet is timely.

And so it was with ad-supported video on demand (“AVOD”). There was a consumer appetite for ad-supported free content in the data. But AVOD emerged through a triumvirate of forces – demand from consumers, changing dynamics for advertisers and increasing pressure on network economics.

On the content side, networks monetize their content through carriage rates (cable companies offer their programming), advertising, syndication (selling their programming to other networks or platforms) and fees from local affiliates. In this period, they were being squeezed on all sides. They had large libraries but it was increasingly hard to monetize them, as Amazon, Netflix, Hulu et al. were spending billions on new original content ($6bn at Netflix alone). Heavily fragmented eyeballs and rapidly declining ratings were depressing the value of advertising, and the window to monetize content closed fast. Cord cutting was putting pressure on carriage and advertising and skinny bundles (virtual, smaller cable bundles) were nascent in their ability to fill the gap.

On the advertiser side, many assumed the decline in linear ratings would just motivate ad buyers to shift spend to digital. But advertisers need brand-safe, TV-like inventory. TV actually offered something unique by offering enormous scale to brand advertising – that powerful form of halo marketing that makes all the conversion-centric targeting work. And there was and remains a ton of advertising seeking opportunities to get in front of as wide an audience as possible.

The consumer aspect was the most interesting. At the time, over-the-top viewing was just accelerating, and for the first time a majority of households had internet connected TVs. The focus was entirely on subscription video on demand (“SVOD”) platforms and skinny bundles. Since Netflix / Amazon / Hulu already had the market cornered on broad offerings, other players were trying to compete with niche platforms that asked loyal bases to pay high monthly fees. But as one after another of these failed (Seeso, Freeform, FilmStruck) it should have become evident that there were some flawed assumptions there.

Cord cutting households were looking for free alternatives, and SVODs weren’t plugging that gap. Most SVOD dollars were actually coming from pay TV households: of the roughly 91M homes with cable or satellite, 69M have some level of OTT service[1]. The skinny bundles did manage to reclaim about a third of households that cut the cord as a cheaper alternative[2], but it was clear the majority of cord cutters weren’t replacing their monthly cable bill with a stack of subscription platforms. Cost was by far the biggest cord cutting reason.[3]

Still, AVOD was hard to make a case for. What made it even harder to believe was that we weren’t the target customers. Many on our team were paying for cable and subscription services and they didn’t have appetite for a platform without new releases, where content was peppered with ads. But we weren’t a representative sample. Well before the tide of cord cutting accelerated, 17% of households were not paying for any cable.

More interestingly, there was a rise of households bridging the gap with streaming solutions plus a digital antenna. By 2017 the number of households that complimented their broadband with a digital antenna was growing fast, and sitting at around 7%[4]. You might remember a Wall Street Journal article that describes millennials feeling like they had discovered a “hack” to get free broadcast TV by antenna[5]. Over-the-air signals were softening the blow of cord cutting by offering access to the major broadcast networks, and households were delighted, despite a heavy network ad load. To put a finer point on it, households that were cutting the cord were already flocking to free ad-supported alternatives.

It was the combination of all these factors that catalyzed the change. Even just a year after our investment, AVOD has become the centerpiece of strategy for near all major content houses – Peacock at Comcast/NBC (w/acquisition of Xumo & Vudu), ViacomCBS with Pluto, Fox with Tubi, Roku (now with Quibi), etc.

What’s Happened Since

There were many prevalent beliefs dominating the industry at the time, and it’s fun to reflect on the shifts:

Connected TV would lose the war to mobile. Interestingly many felt that TV and long-form content were on the decline generally and would soon be replaced by mobile engagement and social platforms. Ultimately the TV remained dominant, but even in 2017 the data pointed to that: households were watching 80+%[6] of their content on their living room TV. Quibi is a nice reminder of how key it is today to access content on that screen.

Ad buyers don’t want connected TV inventory. In 2017 connected TV ad inventory was in its early days, and often treated like the stepchild of mobile and digital advertising generally. Content was on authenticated platforms, so the data was isolated across systems and it was hard to say if a campaign was reaching multiple audiences or the same users many times. But even with that, Hulu was selling out its inventory, and ultimately it should have been clear that there was a ton of value in TV-like digital inventory with reach. And so it was that while in 2016 OTT ad spend was marginal compared to total TV + digital advertising, it’s since been growing 50% y/y and was $5bn last year. We remained very bullish on the opportunity here, and connected TV advertising has since driven Roku’s platform revenue, Hulu’s revenue and the trajectory of the TradeDesk, as well as leading to a nice conclusion for our exit in 4C.

Targeted advertising and affluent audiences are key to ad models. Sure, there’s a lot of margin in selling a Peloton, and advertisers are willing to pay more for the targeted advertising that delivers them that customer. But a highly targeted platform inevitably has a very small number of Peloton-buying targets, and you’re going to have to prove conversion if you’re trying to sell an ROI story to advertisers paying big dollars to work with you vs. Facebook. Broad reach, not a targeted audience, is a huge value missing in digital, and in fact households between the coasts with average incomes are the more compelling audience to offer. I’ve seen many platforms come along offering access to affluent customers, underappreciating that the average household is the target for many of the Fortune 50.

You need to create originals to compete for users. I will not pretend that rolling out hits isn’t essential to convincing people to pay for SVOD’s, but I think what’s often overlooked is that people hop onto content platforms with similar goals to their use of social platforms - the promise of being entertained. I think the last few years have proven that personalization is the future of entertainment, and the content itself is secondary. It can be influencer videos, gaming streams, Hollywood blockbusters or news, but if a platform has a lot of it and the right recommendation engine, people will flock. The fact that people can fall into a YouTube hole, spending hours watching cabinet assembly videos, speaks to how often the recommendation algo can trump premium content to keep users engaged.

TV is dead, long live social media. This claim lives on, as annually I see an article published asking when tech will “eat Hollywood.” Certainly YouTube and TikTok remain free and engaging alternatives that capture plenty of viewing, and I am not qualified to comment on whether Gen Z’ers have too short an attention span to appreciate Casablanca. But today long-form content continues to capture hearts and minds.

Still Holding Our Breath…

Our research from this period called out three other areas of opportunity that we have yet to see realized:

Commercial entertainment going the way of residential.

OTT content options enabled millions of households to turn their back on costly, bulky cable packages. Today, commercial venues still pay for costly bundles, despite the fact that the average venue cycles through only four channels. What’s more, these commercial screens offer tremendous and untapped potential to engage and retain customers. We’re excited to be investors in UpShow to chase this one.

What a streaming future for sports looks like.

Sports continues to be the linchpin of the pay TV system. 55% of pay-TV households consider live sports an important factor in the decision to keep their pay-TV service.[7] Networks can afford live rights given advertising and carriage from cable. As cable loses subs, networks struggle to make the math work and you should expect them to lose rights to tech players like Amazon who can monetize by throwing that content behind a paywall. For consumers, access to major sports outside of cable isn’t much better - skinny bundles are still a patchwork of rights and trying to aggregate similar content across league SVOD services a la carte is much more expensive than a cable bill.

But all of this fragmentation might be ok, as younger audiences increasingly interact with sports content differently anyway – preferring to watch highlights, engage with content on social channels, follow alternative sports like surfing/drone racing/esports, and follow off-the-court activity as much as on. Especially as betting grows, we expect new digital platforms to emerge and capture that consumption.

A currency for cross-platform measurement emerging.

TV advertising targets households. Out-of-home targets foot traffic. Digital targets Albert who abandoned his cart and might still be in need of a new duvet. The standard marketer or head of growth today doesn’t want a TV strategy and a digital strategy and a hot air balloon strategy, they want an audience acquisition strategy. A unifying metric is key to understanding acquisition cost and optimizing spend. We’re excited to back Tvision, which as I type is creating a unifying currency across TV and digital.


To be clear, we could have been right on all the market signals and still been very wrong on the bet – ultimately it is the team we back that matters most, and I believe only the incredible folks behind Tubi could have built a model enabling millions to stream freely today. And so we are on the hunt for the teams that will make us look smart on the areas of streaming we believe have yet to unfold.

As always, we welcome your thoughts. And for more of our thinking, please visit

[1] Public company filings

[2] Barclay’s research from Kannan Venkateshwar; public filings

[3] Perez, Sarah. “77% of consumers want a la carte TV, TiVo study finds, but price they’re willing to pay drops.” Techcrunch, June 2017.

[4] Dixon, Colin. “Antenna TV plus Broadband Sweet Spot for Consumers.”, 7/24/17

[5] Knutson, Ryan. “Millenials Unearth An Amazing Hack to Get Free TV: the Antenna.” WSJ, August 2017.

[6] “Nielsen: over 92% of viewing among U.S. adults still happens on the TV screen.” Techcrunch, 5/26/2017

[7] Greunwedel, Erik, “Parks: 55% of Pay-TV Households Say Live Sports Key to Keeping Service.” MediaPlayNews, Feb 2021.

By Yelena Shkolnik

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