After two weeks that may have felt like an eternity to college football and NFL fans, the carriage rights dispute between YouTube TV and ESPN's parent company was settled over the weekend. A story that isn't being publicized in the now-concluded 15-day programming blackout is the opportunity for a third player caught in the crossfire: FuboTV (FUBO 5.96%).
Unlike the titans behind the content scuffle -- Disney (DIS 0.13%) and YouTube TV parent Alphabet (GOOG +2.98%) (GOOGL +2.88%) -- Fubo is a small player in live TV streaming with a market cap of just $1.2 billion. Despite being a clear beneficiary of the dispute, Fubo stock actually declined 2% through the 11 trading days of the blackout. The market missed the opportunity during the standoff, but there is still money to be made in Fubo even now with the situation settled.
Image source: Getty Images.
When you wish upon a stall
A two-week outage in programming on the leading live TV streaming service that started on the evening of Oct. 30 may not seem like a lot, but it's the longest tussle that Disney has ever had with a cable, satellite, or live TV streaming service provider. The 15-day standoff topped the previous record holder between DirecTV and the House of Mouse that went on for 13 days last year.
The method to the madness -- or mouseness, in this case -- is clear. Programming costs rise for major networks, particularly in the sports arena where league contracts have rising annual rates in ever-rising bidding wars. Disney's ESPN is the undisputed giant in sports programming. Costs are also rising for ABC and Disney-owned cable channels, but ESPN is the most expensive channel for any cable, satellite, or live TV platform to carry. If you wonder why your pay TV provider keeps bumping rates higher, it's just a matter of rising costs.
Negotiations happen every few years when deals between the networks and providers come up for renewal. It's not rare for two sides to start negotiating in public after the lapse of the previous contract, with subscribers inconvenienced in the balance. Google's YouTube Live TV is the country's most popular live TV streaming service, topping 10 million subscribers earlier this year. It may not seem like a lot of homes for a leader, but the cord-cutting revolution is real.
A Pew Research Center study this summer revealed that just 36% of the country's homes are still tethered to traditional cable or satellite television. Unfortunately for Alphabet, it's not as if everyone else is duplicating the experience digitally. Less than 20% of the country is currently paying for a live TV streaming service. A whopping 83% of the country subscribes to a premium streaming offering, but this usually means cheaper monthly apps offered by the leading streaming service stocks.
This brings us to Fubo, a small player that's about to get a lot bigger.
NYSE: FUBO
Key Data Points
A stream is a wish your heart makes
As a small but sports-centric live TV streaming service, Fubo likely experienced a spike in traffic on Halloween and the next few days. It had just 1.63 million paid subscribers at the end of the third quarter.
Fubo announced quarterly results four days into the outage. It was asked by an analyst about the impact of the YouTube TV disruption, but largely dodged the question.
"That's not anything we can really talk about," CEO David Gandler responded during the Nov. 3 earnings call. "What I can say is that -- just like last year -- we see bumps all the time from people that are looking for programming."
He later conceded that "we have seen an influx of YouTube TV customers," but didn't elaborate.
Anecdotally, Fubo did receive some renewed attention. Roku was nudging viewers looking to catch college games not available to YouTube TV subscribers to five-day trial Fubo subscriptions on Nov. 1. The disruptions lasting two weeks likely stretched those five-day freebies to paid subscribers.
There were other live TV streaming options, including Disney's new $29.99-a-month ESPN Unlimited app or Hulu + Live TV, the Disney-owned live TV streaming service that is the country's second largest in this niche. This brings us to January when Disney brokered a deal to merge its live TV streaming service with Fubo, with the family entertainment giant retaining a 70% stake in Fubo despite contributing closer to 75% of the combined revenue. The deal between the two companies closed three weeks ago.
It's fair to say that Hulu + Live TV -- not to be confused with the stand-alone Hulu service -- is not as relevant as Disney's three major premium streaming services. However, with that deal complete, it's hard to see Fubo ever having a problem with carriage renewals with the media stock that now owns a majority stake in Fubo.
With a combined 6 million live TV streaming subscribers, the more fortified Fubo is in a better position to compete against what could be a weakened YouTube TV after this month's episode. If you don't know Fubo yet, there's a good chance that you will soon.
