It’s tough to know if FuboTV, the gritty David that’s been flinging its rocks against the Goliaths, is long for this world.
Biblical David’s rocks were of course guided by God and took down his outsized enemy. Fubo just might need divine intervention, but it has won some early skirmishes.
Fubo, a digital pay TV distributor with 1.6 million subscribers, is suing industry titans Walt Disney, Fox and Warner Bros. Discovery over both their planned sports streaming joint venture Venu Sports, and for their practice of bundling channels and forcing Fubo to buy channels it doesn’t want.
Founded in 2015, Fubo has yet to report a profit, and the latest quarter was no different. The company lost $54 million in the most recent quarter. And while company executives on an earnings call today touted it had narrowly exceeded revenue goals, the company’s stock was down 10 percent in early-afternoon trading on a day the markets were surging.
At the preliminary injunction hearing in August that led to the court-ordered freeze of the Venu venture, lawyers and witnesses for the company described the company’s nine-year red ink run as normal for a startup and assured the court that assuming Venu is not allowed to live, Fubo would reach profitability in 2025.
A company executive today said, “Our 2025 profitability target remains a priority,” not exactly a pledge of black ink flowing next year.
Even if Venu is scuttled, where will the profits come from in a cutthroat industry in which the competitors are far bigger, both in the linear pay TV ecosystem, and the virtual world (Hulu, Sling, and YouTube TV)?
“Today, there are nearly 50 million households in the United States that still subscribe to legacy pay TV, a decline of more than 50% compared to the 105 million cable TV subscribers recorded in 2010,” Fubo CEO David Gandler said today explaining why his business makes sense. “As legacy customers turn to streaming, nearly 30% have subscribed to virtual MVPDs over the trailing 12 months, according to a recent Moffitt Nathanson report.” MVPD stands for multichannel video programming distributors, a fancy way of saying cable or satellite companies. Put a small v for virtual in front of the acronym, and that refers to the Fubos of the world.
“Increasingly virtual is the most profitable path forward,” Gandler continued. “We believe that the industry will come to the same conclusion: legacy business model economics can survive and thrive simply by shifting focus to the virtual MVPD space. We believe this shift to virtual MVPD is necessary to offset the decline of traditional pay TV, and will also enable media companies to grow their revenue and profits. Therefore, we believe we are well positioned over the long term, despite some bumpiness and disruption in the short to medium term.”
It would have been great had the analysts on the call inquired about the duration of this bumpiness or how long is short to medium term. And what does that do to the timeline of the so-called profit goals, profit priority, profit path–or whatever hedging term the execs put after the word profit?
Fubo’s stock is trading at around $1.60, down 50 percent on the year. This is the reality even though Fubo secured the preliminary injunctions against Venu, which the virtual pay TV provider called an existential threat.
Venu’s trio of founders are appealing the decision. Fubo’s lawyers warned the lower district court at the August injunction hearing that allowing Venu to launch would cost it hundreds of thousands of subscribers and lead to the dissolution of the company. Now with Venu sidelined, Fubo is projecting subs will grow to as much as 1.7 million in North America by the end of the current quarter, with up to 355,000 elsewhere in the world.
Fubo’s main objective is to sell sports channels as a standalone package, something it cannot do under the bundling terms dictated by programmers. It believes if it is allowed to do so by winning the lawsuit, it will be well poised to take advantage of the collapsing linear system. It is also estimating billions of dollars in damages.
So is it a buy, sell, or hold on Fubo?
That depends in part on the 2nd Circuit decision, for if Venu is as much of a threat as Fubo makes it out to be, then an adverse ruling would doom the company. But if it survives the appeal, then settlement before a scheduled October 2025 trial is always a prospect that could keep Fubo alive. So no stock advice here – forecasting randomly assigned three-judge appeals court rulings is a fool’s errand–but one thing is clear: Fubo’s fate should be decided in 2025.
