FuboTV (FUBO) has set out to dominate sports streaming, with a proposed “game-changing” merger with Disney’s Hulu+ Live at the heart of its strategy.
The deal would give Fubo access to Disney-owned sports programming, including ESPN and ABC, significantly expanding its content library.
Fubo, which currently airs more than 55,000 live sporting events each year, has billed the merger as a transformative leap in the battle for streaming supremacy.
Investors have bought into the Fubo vision so far. The stock soared 250% after the announcement and remains 92.1% up year-to-date.
However, as the company looks to cement its position as the go-to platform for sports fans, things appear to be easier said than done.
Shrinking subscriber base beyond seasonality
On Friday, Fubo reported $407.9 million in Q1 North American revenue, a 3.5% year-over-year increase. However, it also posted 1.47 million paid subscribers in the region—a 2.7% decline from a year ago.
The company said these results "met and exceeded Fubo’s applicable guidance range, respectively."
International results were even weaker. In its Rest of World (ROW) segment, Fubo reported $8.4 million in revenue, down 0.4% year-over-year, and 354,000 subscribers—a sharp 10.9% drop.
In their Q4 shareholder letter, CEO David Gandler and Executive Chairman Edgar Bronfman Jr. had warned of a potential 16% year-over-year decline in subscribers by mid-Q1, attributing the anticipated drop to a contract dispute with TelevisaUnivision.
Advertising revenue also took a hit.
North American ad sales fell 17.3% to $22.5 million, which management blamed on the loss of certain ad-insertable content, according to the company’s latest shareholder letter.
Analysts at MoffettNathanson said some churn was expected. Many subscribers cancel after the Super Bowl and return in the fall when football season resumes.
However, Fubo's subscriber loss goes beyond seasonal patterns, especially since the year-over-year drop in the ROW segment can’t be explained by NFL-related cycles.
The DOJ scrutiny
Adding to Fubo’s challenges, the proposed Disney merger is now under review by the U.S. Justice Department (DOJ).
Senator Elizabeth Warren has formally objected to the deal, warning that it could reduce competition in the sports streaming market and harm consumers.
“This proposed acquisition raises significant concerns under antitrust law, would give Disney increased market power and incentives to increase costs for viewers,” Warren wrote in a February letter to the DOJ.
“[The deal] should be regarded as another data point in Disney’s history of anticompetitive behavior,” she added.
If approved, the combined platform would boast more than 6.2 million subscribers, a subscriber base that could disrupt sports streaming.
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