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Pluto TV Was an April Fool’s Punchline 8 Years Ago. Today It’s the Future of Streaming

Paramount Global's popular FAST (free, ad-supported streaming television) service Pluto TV crossed $1 billion in revenue last year – without one paying subscriber.

Pluto TV logo with unicode emoji

The Pluto TV logo with a unicode emoji

Pluto TV/unicode emoji

As Netflix gets busy revising its business model and adding a cheaper tier with commercials, it’s still behind the curve. The current darling of the streaming industry is FAST, or free ad-supported streaming television. Recreating linear television for the streaming age is a lucrative business: In 2018, Pluto TV founder Tom Ryan sold his company to Paramount Global (then Viacom) for $340 million. Last year, Pluto topped $1 billion in ad revenue.

It’s a delightful reversal of fortune for Ryan, who is now president and CEO of streaming at Paramount. “We launched on April Fool’s Day in 2014,” he told IndieWire, “and lots of people thought we were indeed fools.”

Pluto wasn’t, and FAST isn’t. With results like that, who needs subscribers? The coin of the realm is MAUs, otherwise known as Monthly Active Users. Pluto ended 2021 with more than 64 million monthly active users, according to Paramount financial reports.

Pluto is no dwarf in the streaming universe and neither is FAST. A Thursday Variety Intelligence Platform report on the state of FAST estimated the rapidly multiplying U.S. market to be worth between $5.3 billion-$6.1 billion by 2025. Compared to 2019, that represents growth of 646 percent-763 percent. According to eMarketer, the value of the entire linear and connected TV industry will exceed $93 billion that same year.

In 2021, FAST accounted for about four percent of linear-channel advertising (defined as actual linear TV plus FAST streaming). Other players in the FAST space also include Tubi (bought by Fox in 2019), the Roku Channel (launched in 2017), the free tier of Peacock (launched in 2020), the just-rebranded Freevee (aka IMDb TV and owned by Amazon), and the built-in services from Smart-TV manufacturers Samsung, LG, and Vizio.

The FAST acronym itself, which TVREV co-founder and lead analyst Alan Wolk created in 2018 as a way to differentiate truly free services from ones like subscription-AVOD Hulu, refers to a platform that makes its money entirely from advertisers and none from the end user. (Unless you consider time as money, which you probably should as a general life rule.) Consumers of these platforms tolerate ads in exchange for free TV — sort of exactly like the old broadcast-television model.

“[Linear TV] has done a lot of things right over the years,” Ryan said, adding: “It has not modernized for the streaming era.”

When the serial entrepreneur launched Pluto TV in 2014, the then-nascent streaming business was entirely on-demand, paid-subscription, and “advertising was going the way of the dodo,” he recalled during our Zoom conversation. “To many, we were wrong three times out of the gate.”

When Pluto began, it used YouTube API. Today it’s a popular drop-in service (go to pluto.tv and content starts playing – no registration required) that combines hundreds of “live,” linear channels with a robust on-demand library. Ryan credits Pluto’s success to the usual suspects of timing, teamwork, and luck — along with the “willingness to take a contrarian view.”

Whether Pluto invented the modern FAST industry or accelerated it is a matter of opinion. What’s clear is Ryan pioneered the market for 50/50 revenue-share deals with content partners — now considered an industry standard. Pluto, like the rest of its growing corner of free streaming, also has some advertising deals with minimum guarantees and others with Netflix-esque flat-fee licensing.

FAST’s 50/50 revenue split is a system designed to be win-win — even win-win-win, when considering the advertisers. “As desirable demos move away from linear TV… advertisers do not have as many places to reach them,” Wolk told IndieWire.

So FAST makes sense for advertisers, but why are consumers so drawn to streaming reruns? Wolk’s theory about the rising popularity of FAST is one that mirrors the decades-old feelings about basic cable. “People just want TV on in the background,” he said. “They didn’t really care what they are watching; it’s a low ad-load, it was free. A lot of times it was older shows they remembered from when they were younger and hadn’t seen in a while.”

There’s also what he identified as the “analysis paralysis” factor. When presented with too many choices — a fair description of the Peak TV landscape — people freeze and default to the option with the lowest barrier-to-entry. Plus, you know, it’s free.

FAST also solves a pervasive market issue. “All the giant SVOD services, their goal is total world domination,” Wolk said. “And they’re all realizing that outside the U.S., Europe, and a couple of countries in Asia, nobody’s got money to pay a streaming service. Netflix is learning this the hard way in India – they’re getting their asses kicked.”

India does offer the potential for ad revenue — hence the very global Netflix’s Tuesday announcement it would finally consider an ad-supported tier. Potential international AVOD Netflix users will sit through commercials because, as Wolk put it, “They’re not spoiled Americans.”

FAST has swiftly carved out a nice little niche. All told, Paramount Global’s streaming portfolio reached nearly $4.2 billion in revenue last year, split almost equally between ad sales and subscription fees. Ryan, who also runs SVOD service Paramount+, does not see Pluto becoming the free tier of Paramount+, which neared 33 million subs at the end of 2021. (The all-in Paramount Global tally was north of 56 million streaming subscribers.) But he’s spent a lot of time thinking about it.

“Pluto TV is too powerful a brand and it’s frictionless; it stands for free TV,” he said. “If we were starting from scratch, we might consider doing everything under one brand… But there is a beauty to having a product that can play on its own terms.”

Pluto’s market share means there’s unlikely to be a free tier of Paramount+. Instead, when a user churns out of Paramount+ (read: decides to stop paying), the company guides them toward Pluto TV with the goal of eventually reconverting the subscriber-turned-MAU back to the pay-streaming option. Even if they take to Pluto more than Paramount+, there is value for Paramount Global. (And it’s the highly desirable “capital-efficient” kind, per Ryan.)

It’s convenient that Ryan, a guy who oversees an SVOD service with an AVOD tier as well as FAST Pluto TV, believes the future of streaming is the combination of all three. It’s also likely that he’s correct – just like he was eight years ago.

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