The $340 million investment will put Viacom it in a better position to compete with the likes of Netflix.

Viacom, the US media and entertainment giant, recently agreed to purchase streaming start-up Pluto TV.

Viacom buys Pluto TV: what it means

The investment will give Viacom a greater footing in the direct-to-consumer (D2C) market and put it in a better position to compete with the likes of Netflix. Pluto TV – an Advertising Video on Demand (AVoD) service – will also give Viacom the opportunity to drive even more consumer engagement with its content.

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The $340 million deal is the latest in a series of moves that see broadcasters making investments in their D2C businesses.

Pluto TV currently offers more than 100 live TV channels as well as thousands of hours of on-demand content to its users. The platform is ad-supported, meaning users don’t have to pay for a subscription, a fact that Viacom will be able to use to leverage engagement with Viacom content with users looking for an affordable alternative to other D2C services.

Viacom will have access to Pluto TV’s 12 million active monthly users, helping to project Viacom’s existing D2C business on a global scale. An AVoD solution also compliments Viacom’s existing, primarily subscription-based, D2C portfolio, by providing an additional route for consumers to access free video content.

The big picture: VoD, SVoD and AVoD

Looking at the bigger picture, acquiring Pluto TV is an important strategic move for Viacom. Video-on-demand (VoD) has established itself as a serious challenger to traditional broadcasters (with Netflix and Amazon Prime Video, for example). Their competition has made SVoD (subscription video-on-demand) and AVoD platforms a crucial part of any broadcaster’s current and future product portfolio. Hence, Viacom’s investment in an ad-supported, free D2C business will help reinforce its consumer strategy and make it better equipped to compete with the likes of Netflix and Amazon on a global scale.

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Although only launched in 2013, Pluto TV has proven itself to be a serious player in a very competitive market. A recent study by Apptopia claimed that Pluto TV has been acquiring more new users than both YouTube TV and HBO Now since July 2013. This is impressive when YouTube’s digital prowess and HBO’s position as a content powerhouse are taken into consideration. Clearly, AVoD services akin to Pluto TV resonate well among a global audience and thus make for a promising investment opportunity for Viacom.