A New Frontier for Private Equity Returns
In the evolving landscape of digital media, Smart TV channels—also known as FAST (Free Ad-Supported Television) channels—have emerged as one of the most promising and underpenetrated growth markets. As the streaming wars plateau and consumers shift from expensive subscriptions to free, ad-supported content, Smart TV channels offer a compelling opportunity for private equity (PE) firms to generate strong returns through content aggregation, tech-enabled distribution, and scalable monetization models.
What Are Smart TV Channels?
Smart TV channels are digital streaming channels available on internet-connected television platforms such as Roku, Amazon Fire TV, Samsung TV Plus, Vizio WatchFree+, LG Channels, and others. Unlike traditional cable or subscription video-on-demand (SVOD) services, these channels are:
- Free to access
- Monetized through programmatic advertising
- Easily launched by media startups, legacy content owners, or brands
The model mimics traditional linear TV with scheduled programming, but it operates entirely through connected TV (CTV) ecosystems—making it cheaper, more targeted, and more data-driven.
Why Smart TV Channels Are Attracting Private Equity
Several converging factors have made this an increasingly attractive sector for PE investment:
- Cord-Cutting Acceleration
As millions of consumers abandon cable subscriptions, Smart TV channels fill the void with niche, curated, and easy-to-access content—especially for price-sensitive households. - Ad Revenue Explosion
CTV ad spend is growing rapidly—reaching over $25 billion in the U.S. in 2024, with projections to surpass $40 billion by 2027. FAST channels are a major beneficiary, offering high engagement and measurable ROI for advertisers. - Low Barrier to Entry and Scalable Models
Unlike traditional networks, Smart TV channels require minimal CapEx, can be launched in weeks, and scale across multiple platforms. This makes them ideal for PE’s asset-light investment strategies. - Attractive Acquisition Targets
Major streamers (e.g., Pluto TV by Paramount, Tubi by Fox, and Xumo by Comcast) have demonstrated strong M&A interest in smaller players with valuable audiences and IP, creating viable exit paths.
Return Profile for PE Investors
Private equity-backed Smart TV ventures are demonstrating strong returns, especially when they combine high-quality content libraries with scalable ad-tech solutions and distribution reach.
- IRR (Internal Rate of Return) for successful investments has ranged between 25% and 40%, especially for early movers with cross-platform strategies.
- MOIC (Multiple on Invested Capital) of 3x–6x over 3–5 years is increasingly achievable when a channel achieves strong viewer retention and advertiser partnerships.
- EBITDA margins for scaled operations can exceed 20%–30%, particularly when content costs are controlled via licensing, evergreen IP, or owned media libraries.
Case Studies and Deal Activity
- Fox’s Acquisition of Tubi (2020): Acquired for $440 million, Tubi has grown into a major FAST platform with over 70 million monthly active users. Fox reported significant revenue growth from Tubi in its earnings, validating the model.
- Chicken Soup for the Soul Entertainment’s Crackle: Acquired and expanded with original programming and library content, showing the viability of roll-up strategies in the FAST space.
- Redbox’s Entry into FAST: Before its acquisition by Chicken Soup for the Soul, Redbox diversified into Smart TV channels, offering a case study in pivoting a legacy brand into CTV monetization.
Operational Value Creation Levers
PE investors can drive value in Smart TV channels by focusing on:
- Content Strategy
Building vertical-specific channels (e.g., motorsports, DIY, history, or nostalgia) using owned or licensed content to attract loyal, niche audiences. - Ad Tech Integration
Leveraging real-time bidding, dynamic ad insertion (DAI), and user-level data for higher CPMs and monetization efficiency. - Platform Distribution
Expanding availability across Roku, Fire, Samsung, LG, Vizio, Apple TV, and mobile apps to broaden ad inventory and reduce dependency on a single ecosystem. - Brand Partnerships
Offering native product placement and sponsored segments in high-performing channels to boost non-CPM revenue.
Risks and Challenges
As with any high-growth sector, Smart TV channels come with risks:
- Ad Revenue Volatility: CTV ad rates can fluctuate with broader macroeconomic shifts, impacting cash flows.
- Content Licensing Costs: As competition intensifies, so does the cost of acquiring premium or exclusive content.
- Platform Power: Roku, Amazon, and other distributors wield significant control, including ad revenue sharing and channel discoverability.
- Viewer Churn: Without compelling content or curation, viewers quickly switch, making engagement a critical KPI.
Exit Landscape
The exit environment for Smart TV channels is maturing rapidly:
- Strategic Acquisitions: Media companies looking to expand FAST offerings (e.g., Warner Bros. Discovery, Netflix, Disney) are potential acquirers.
- Public Markets: Though limited, potential IPOs or SPACs could return for scaled players with strong ad revenue.
- Secondary PE Sales: Interest in mature, cash-generating CTV platforms is growing among growth equity and secondaries investors.
Conclusion: Smart TV Channels Deliver PE-Sized Returns
Smart TV channels offer a rare trifecta for private equity: high growth, capital efficiency, and clear paths to monetization and exit. As consumers seek more flexible, free content—and advertisers chase measurable, high-impact placements—PE firms that move early and invest strategically in this space can realize outsized returns.
Whether through content roll-ups, ad tech platforms, or direct-to-CTV media brands, the Smart TV channel revolution presents one of the most promising media opportunities for PE in the 2020s.
