Ready for some terminology? fuboTV (FUBO 6.72%) is a virtual multichannel video programming distributor (vMVPD) -- that's a lot of words, but it simply means fuboTV is a streaming service that blends live TV and on-demand content. The company offers viewers over 100 channels across sports, news, and entertainment, but at a cheaper price than traditional cable and satellite plans.
According to eMarketer, the percentage of U.S. households with a vMVPD service jumped from 1.6% in September 2017 to 7.8% in September 2020. That means fuboTV has a substantial market opportunity, and it should only get bigger as more viewers cut the cord.
But does this company have what it takes to be a millionaire maker? Let's dive in.
fuboTV's sports-first strategy
Live TV streaming services like Disney's Hulu+ Live TV and Alphabet's YouTube TV are much larger than fuboTV in terms of subscribers, not to mention that both Disney and Alphabet have much deeper pockets. However, fuboTV still has a few advantages, albeit slight ones.
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In its base package, the company offers 43 out of the top 50 Nielsen-ranked sports, news, and entertainment channels. That's more than any other live-TV streaming service. Additionally, fuboTV takes a sports-first approach, offering greater coverage of sporting events than any of its rivals. This includes professional leagues like the NFL, NBA, MLB, and others, as well as college sports. Viewers can also upgrade to subscription packages like Sports Plus for even more content.
Management believes this strategy allows the company to tap into naturally high demand for sports, which should keep fuboTV's customer acquisition costs lower than its rivals. However, the company has also bolstered its news and entertainment offering in recent years. For example, fuboTV inked a deal that brought Disney networks onboard in August. This helps round out the company's offering, making it more appealing to non-sports fans.
In fact, the company phrases its business model in this way: Come for the sports, stay for the entertainment.
fuboTV's playbook
In December 2020, fuboTV acquired Balto Sports as part of its plans to enter the online sports wagering market. Management has previously expressed interest in this idea, citing the natural fit with fuboTV's sports-first streaming service.
Likewise, in January 2021, fuboTV took another step down this path, announcing its intention to acquire sports betting firm Vigtory. The company plans to use Vigtory's sportsbook platform and betting technology to offer subscribers a frictionless betting experience.
Additionally, during a recent interview, CEO David Gandler said that the company "should be looking at" striking exclusive deals for live sports events. While this is far from concrete, if fuboTV were able to offer exclusive content to sports fans, that would significantly strengthen its value proposition. Investors should pay attention to this situation closely. In the streaming world, content is king -- and sports content is no exception.
A big market opportunity
According to management, fuboTV's current market opportunity includes the $226 billion global pay-TV market and the $130 billion digital ad market. And if that wasn't enough, the sports wagering market will add another $155 billion to the total market opportunity by 2024.
fuboTV recently upped its fourth-quarter revenue guidance to $94 million to $98 million, representing 77% growth. The company also upped its subscriber count guidance, which is now expected to exceed 545,000 for 2020 -- 72% more subscribers than it had at the end of 2019.
This strong growth has helped fuboTV capture market share in recent years. But investors should keep the big picture in focus: Hulu+ Live TV is still much larger, with 4 million subscribers. Moreover, Hulu+ Live TV and YouTube TV (the top two vMVPDs) are both gaining market share as well.
|
Market Share |
September 2018 |
September 2019 |
September 2020 |
|---|---|---|---|
|
fuboTV |
3% |
4% |
5% |
|
YouTube TV |
19% |
21% |
26% |
|
Hulu+ Live TV |
24% |
31% |
34% |
Data source: Antenna.
A final word
So, is fuboTV a millionaire maker? It certainly could be. The company's sports-first approach helps differentiate its service, and it positions fuboTV to enter the massive sports betting market. That gives the company an advantage over its larger rivals.
However, live TV streaming is highly competitive and fuboTV ranks sixth in terms of active subscribers. At the end of the day, the company needs to grow its customer base if it hopes to bring more ad dollars to the platform. That's where investors should focus their attention in the coming quarters.
Right now, my advice is to avoid jumping all in. I think it's fine to pick up a few shares here, but wait to see if the company is moving in the right direction before building a larger position.
