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fuboTV Accelerates International Expansion With Acquisition

By Parkev Tatevosian, CFA – Dec 7, 2021 at 6:22AM

Key Points

  • Molotov SAS boasts 4 million monthly active users of its freemium-based streaming service.
  • Molotov SAS operates in France and several African countries.
  • fuboTV hopes to gain engineering expertise and business model insight from the deal.

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How does the streaming company's purchase of France's live-TV streaming company Molotov SAS play into its long-term plans?

fuboTV (FUBO 7.69%) sells a bundled channel subscription similar to what you can get through traditional cable TV, but with an emphasis on sports-related channels. What makes it even more unique is that it offers its various products through an internet-based streaming service. The company is making steady progress with the help of that advantage, and it now has more than 1 million paying subscribers, mainly in the U.S.

Plenty has been written about fuboTV's efforts to grow in the U.S. What is less known about the entertainment provider is that it is also working hard to expand internationally. Last month, fuboTV took its latest (and biggest) step in that direction when it announced it was acquiring France's top-tier live-TV streaming company, Molotov SAS, for $190 million.

Let's take a closer look at how Molotov SAS works and how it works into fuboTV's long-term plans.

A family watching television.

Image source: Getty Images.

Buying Molotov SAS opens up new possibilities for fuboTV 

fuboTV did have some international presence already, with operations in Canada and Spain. But the acquisition of Molotov SAS will be a significant expansion. The French company boasts 4 million monthly active users and is a little different than fuboTV in that it runs a freemium model. Folks can join its free services and upgrade to a premium paid tier later.

The agreement calls for fuboTV to pay $190 million for Molotov SAS, with at least 85% of that payment coming in the form of stock. Molotov has customers in France and several African countries, including Morocco. The deal is expected to close in the first quarter of 2022.

In fuboTV's third-quarter conference call, CEO David Gandler was asked about the reasons behind the acquisition. He highlighted two: 

One is, as you know, there's some significant headwinds here in the U.S. with respect to the labor situation. It's very difficult to hire engineers. Molotov has a very, very strong team of 100 plus, which if you think about it, our businesses are very similar in many respects. And so there's an alignment of technology and infrastructure, tooling and also obviously, the operational model. So we think that we could pretty much integrate relatively quickly ... The second is, it's the No. 2 streaming application in France, which is the second-largest European market with over 60 million households. So with 4 million monthly active users, we thought that this was a great opportunity for us to learn about their business model. Remember, we do not have a freemium model. And just to highlight again what that is, it's -- a freemium model really means that you have a free tier of content, which in their case is live TV channels that they then use to upsell to a paid tier.

One other exciting point the CEO mentions later in the conference call is that fuboTV is getting the technology that Molotov has developed to very efficiently localize in different geographies, which could prove invaluable as fuboTV continues expanding.

The potential was too good to pass up for fuboTV 

The acquisition is likely to speed fuboTV's international ambitions with a solid base to start from in France. What's more, adding the freemium model capability could be vital to expanding to emerging markets worldwide where household incomes are lower.

Did fuboTV pay too much for the purchase? That remains to be seen, and it will depend on how well fuboTV can integrate Molotov SAS into its operations. Suppose it turns out that the Molotov SAS acquisition sets the foundation for fuboTV to expand into dozens more countries over the next several years? In that case, the acquisition may look like a bargain in hindsight for this growth stock

Parkev Tatevosian has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends fuboTV, Inc. The Motley Fool has a disclosure policy.

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