fuboTV (NYSE:FUBO) isn't exactly a household name, and for good reason. The virtual cable television service is only six years old, and virtual (or streaming) cable TV remains an unsung alternative to traditional cable service. Throw in the fact that fuboTV is competing with the likes of Walt Disney and Alphabet, and its lack of name recognition makes even more sense.
The fact is, however, this singularly focused outfit is on a path to viability. Not only is there room for more than one player in this market, but the market itself also has enormous potential. Indeed, 2021 is shaping up as the year virtual cable television explodes.
Yes, virtual cable TV
It's possible you're already using it without even realizing it. Virtual cable television looks and feels like traditional TV piped into your home using a coaxial cable. But it's actually delivered as a digital signal using a broadband internet connection. Such providers are often referred to as virtual multichannel video programming distributors, or vMVPD for short.
It's not a big business yet, despite its lower price. Disney's Hulu + Live has a modest 4.1 million subscribers paying $65 per month for the combination of Hulu and a relatively typical cable channel lineup. Alphabet says there are more than three million people paying $65 per month for its similar traditional cable alternative called YouTube TV. fuboTV costs the same and serves around a half-million viewers. For perspective, eMarketer estimates around 77 million U.S. households are still paying for traditional, linear cable TV service.
There's a major red flag tucked into eMarketer's estimated figure, however. Five years ago, it was near 100 million. Three years from now, it's expected to be less than 63 million.
And that forecast may be optimistic. Recent consumer survey data from Parks Associates indicates that 43% of the United States' approximately 109 million broadband internet customers say they're likely to subscribe to a vMVPD service within the next 12 months. That's 47 million prospective cable TV customers coming up for grabs over the course of this year alone. More may make the same choice in 2022. Their top motivation? Traditional cable service has become too costly.
Granted, consumers don't always do what they say they're going to. Even if only a quarter of them make the switch, though, that's a whole lot of shake-up in a short period of time.
Approaching critical mass
Starting out as what many described as the "Netflix of soccer," fuboTV spent the next several years adding to its lineup. The company inked distribution deals with ViacomCBS and Discovery in 2019, and it only added Disney and ESPN content in the middle of last year. Even so, the television media platform still doesn't offer everything one might expect to find in the usual cable package. Turner Network content, including CNN, isn't carried any longer by fuboTV, for example.
For consumers sticking with cable mostly to keep their sports programming, however, the fuboTV model appears to be working. The graphic below tells the story. The analyst community is expecting the company to swing to an operating profit in 2024 on the heels of several years of double-digit revenue growth -- revenue that would imply expectations for a couple million paying customers by then.
This consensus outlook jibes with the subscriber trajectory seen since late 2017.
It's arguable that the analyst consensus underestimates just how rapidly fuboTV may grow, particularly in light of Parks Associates' data and the ace up fuboTV's sleeve. The company is wading into the sports-betting business, announcing in December it was buying Balto Sports, and then in January announcing the acquisition of sports-betting company Vigtory.
It's a good fit for the sports-minded cable service. Ratings agency Nielsen says around one-third of NFL fans are also bettors, for example, while the American Gaming Association reports more than 11 million people in the U.S. bet on professional football in 2020. If fuboTV can successfully and seamlessly meld the cable and wagering businesses for major sports, the opportunity is enormous.
Look past the upcoming quarter
On March 2, fuboTV will release its fourth-quarter results. It's already offered revenue guidance of between $94 million and $98 million, up roughly 80% year over year. The company hasn't offered earnings guidance for the quarter in question, but analysts are modeling a loss of $0.73 per share. The projected year-end subscriber count of 545,000 would be a 90,000-person improvement over the third-quarter tally, and there's no reason to believe fuboTV wildly overstated that estimate.
One quarter's numbers aren't the point here -- fuboTV is riding the wave of a much bigger movement and doing so with a sports-betting angle that's plenty marketable. The upcoming quarterly report is just one chapter of that story.