Walt Disney Co. and FuboTV have just made waves in the streaming world by announcing a surprising collaboration. They’ve decided to merge Fubo and Hulu + Live TV into a new venture that will go by the name Fubo, while still maintaining their individual brands. As a result of this unexpected news, Fubo’s stock price surged, tripling in value on Monday. Meanwhile, Disney’s stock saw a small rise initially but dipped slightly, closing down by 0.1%.
In this new business venture, Disney will hold a substantial 70% stake, leaving Fubo with the remaining 30%. The management of Fubo will take the reins of the new company, though Disney will handle the majority of board appointments. Despite this partnership, both brands will carry on independently.
So, what does this mean for Disney? Let’s dig into the details.
Disney’s investment in Hulu + Live TV has been somewhat underwhelming since its 2017 launch. By the third quarter, Hulu + Live TV had only gathered 4.6 million subscribers, far fewer than the 47.4 million solely on Hulu’s streaming platform. However, the Live TV service generates more revenue, with subscribers paying about $96.11 monthly compared to $12.73 for just Hulu. This pricing structure brings in around $5 billion annually, as Hulu + Live TV also includes Disney+ and ESPN+.
Hulu + Live TV has been Disney’s strategy to cater to cord-cutters yearning for a slice of traditional cable TV. This service faces competition from platforms like YouTube TV, Sling TV, FuboTV, and cable options like Xfinity and Spectrum, which leads the cable pack with about 13 million users.
Although smaller with 1.6 million subscribers, Fubo’s tie-up with Hulu + Live TV promises a broader reach and an enriched consumer experience. By merging with Fubo, Disney eliminates a competitor and resolves a legal squabble involving Venu, a sports streaming service resulting from Disney’s venture with Warner Bros. Discovery and Fox Corporation.
Beyond scaling efficiencies from this deal, Fubo will use Disney’s content to enhance its sports and broadcasting services. This merger seems to hold more significance for Fubo, especially since it could hasten the launch of Venu—a move hindered by Fubo’s lawsuit. Sports streaming remains a largely untapped area for Disney, and this partnership could unlock that potential.
Disney investors have their eyes on an even larger shift—anticipated later this year, which is the launch of ESPN’s standalone streaming service. It promises cable-free access to all of ESPN’s content.
Although the press release about the Fubo-Hulu partnership didn’t mention the ESPN launch, an alliance with Fubo could align with Disney’s broader streaming strategy. Eventually, Fubo might blend into a more extensive ESPN/Hulu + Live TV package, given Disney’s ownership stakes and existing partnerships within the sports streaming domain.
So, is Disney stock worth considering? Despite its dominant market position, Disney’s share performance has lagged, with just a 20% growth over the past decade compared to the S&P 500’s significant rise. Its transition to streaming has been rocky, compounded by an arguably overpriced acquisition of Fox’s media assets.
That said, Disney has reached profitability in streaming, and its focus on sports could be the missing link to complete its streaming strategy. If the partnerships with Fubo and the launches of Venu and the ESPN streaming service proceed as planned, Disney could find itself in a stronger market position by the end of 2025.
While Fubo might be a small part of this strategic puzzle, its merger could signal a broader industry consolidation, potentially benefiting Disney by thinning out the competition and opening pathways for price adjustments.
In the grand scheme, Disney’s stock remains a compelling choice, given its robust business model, strategic market positioning, and knack for making influential deals in the streaming space.
