The battle for influence in the live sports market is heating up among streaming platforms. Netflix NASDAQ: NFLX In the last few months, it has been making every effort to integrate live sports broadcasts. The Mike Tyson vs. Jake Paul boxing match attracted 65 million viewers and gained 1.4 million new subscribers in the following days. The company also achieved record success in broadcasting two National Football League Christmas games.
Walt Disney New York Stock Exchange: DIS strikes back strongly. On January 6, the communications services company said it would acquire a majority stake in sports streaming platform FuboTV. New York Stock Exchange: FUBO. That same day, Fubo shares soared an incredible 251%. They rose another 15% in after-hours trading. Below I will explain the details of the deal, as well as the important implications for Fubo and Disney.
Breaking up of a major Disney-Fubo deal
Walt Disney today
As of 2:04 pm ET
- 52 week range
- $83.91
▼
$123.74
- Dividend yield
- 0.89%
- P/E ratio
- 41.27
- Target price
- $125.54
Under the terms of the deal, Disney will spin off the Hulu + Live TV portion of its streaming business and merge it with Fubo to form a new company. Disney will own 70% of the resulting company. The shares will continue to trade on the exchange under the ticker symbol FUBO. Fubo management will continue to manage the company; however, Disney will appoint the majority of the board of directors. In total, the streaming services will have 6.2 million subscribers in North America. This nearly quadruples Fubo’s subscriber count, which is an obvious reason for the share price to skyrocket.
In a very important development, the agreement resolves all litigation between Fubo and FOX. NASDAQ: FOXWarner Bros. Discovery NASDAQ: WBDand Disney. The three giants collaborated on the previously announced streaming service Venu Sports. Their goal was to consolidate their live sports broadcasting rights and create a powerful industry. This would kill Fubo, which had less than 2 million subscribers. Luckily for this little fish, Fubo won a preliminary injunction to stop Venu from launching. Fubo’s lawyers successfully argued that combining the three giants to create one sports streaming app violated antitrust laws. Fubo’s lawyers said that if they had not won the injunction, the company would have run out of money by the first quarter of 2025.
Is Fubo still a good buy after tripling its price?
FuboTV today
As of 2:05 pm ET
- 52 week range
- US$1.10
▼
$6.45
- Target price
- $3.43
For Fubo, this deal is clearly a major win. We may never know, but it is quite possible that this was the result that management hoped for from the very beginning. Moving forward, Fubo is now also backed by Disney’s vast financial resources, know-how and content. Fubo will be able to create a new Sports & Broadcast service that will leverage Disney’s many broadcast networks. Before the deal, Fubo was in a very difficult position. Analysts had expected revenue growth to begin to slow quickly, and the company had yet to reach profitability despite annual revenue exceeding $1 billion.
Now Fubo and Hulu may be joining forces to try to reignite growth. Hulu was part of Disney’s streaming segment, which earned $321 million in the fourth quarter. The combined company is now expected to have positive cash flow going forward, according to a special call held by the firms. This also puts the company in a much better position. However, it is still very difficult to say that Fubo stock has more room to grow after such a significant price increase.
FuboTV Inc. price chart (FUBO) on Tuesday, January 7, 2025
Disney: Maneuvering the Envious Position in Sports Broadcasts
With this deal, it looks like Disney is done messing around with Fubo. Fubo dropped the lawsuit, clearing the way for Venu Sports. Disney also plans to launch its flagship streaming service ESPN later in 2025. The combination of Venu, ESPN Flagship and Fubo could be a ferocious three-headed monster that Disney controls when it comes to sports broadcasting. However, Disney stock didn’t move that day. The company will still lose part of its Hulu + Live TV business, which has annual revenue of about $5.3 billion.
Disney would not have made this deal if it believed the loss was worth more than the potential gain. Venu Sports can now continue operating. Given the enormous power that Fox, Disney and Warner Bros. have. Discovery still has a strong presence in the sports broadcasting space, it should be very difficult to compete with them. The listed price of $42.99 beats Fubo’s launch price of $79.99. As a proponent of how live sports will become increasingly important in the future of digital media, I can see this deal paying off for Disney in the long run.
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