Sports streaming service FuboTV Inc. is set to be merged with Walt Disney Co.’s Hulu live TV service, the companies announced Monday, in a deal that clears the way for a joint venture streaming bundle targeted at sports fans who don’t want to pay for channels they don’t watch.
The agreement ends New York-based Fubo’s legal action against Venu Sports, the joint service announced last year by rivals Disney, Fox Corp. and Warner Bros. Discovery. In a suit filed in U.S. district court, Fubo had called the proposed venture “a sports cartel” that violated U.S. antitrust laws.
A federal judge agreed and temporarily blocked the service, ruling in August that Venu would “substantially lessen competition and restrain trade.”
Fubo said in a statement that Disney will control 70% of the new combined company, which will trade publicly under Fubo’s current stock symbol. Fubo’s existing management team, led by co-founder and Chief Executive David Gandler, will run the new company.
The deal is subject to approval by regulators and Fubo shareholders.
“We are thrilled to collaborate with Disney to create a consumer-first streaming company that combines the strengths of the Fubo and Hulu + Live TV brands,” Gandler said in a statement. “This combination enables us to deliver on our promise to provide consumers with greater choice and flexibility.”
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The parent company of the TNT cable network asserts the NBA breached its current deal by allegedly refusing to honor rights to match an offer from Amazon.
The combined entity will start out with 6.2 million subscribers and offer a new sports and news-oriented program package that includes a suite of ESPN channels and the ABC television network.
The service will compete against YouTube TV, which has about 8 million subscribers, some of whom are unhappy about its price hike to $82.99 a month. YouTube TV is now the fourth-largest video programming distributor in the U.S.
The combined company will negotiate carriage agreements with other channels for both Hulu + Live TV and Fubo services independently from Disney.
Fubo is getting $220 million in cash from Disney, Fox and Warner Bros. Discovery in connection with the settlement. Additionally, Disney has committed to providing Fubo with a $145-million term loan as part of the deal.
Though the deal removes a major hurdle for Venu, no launch date has been set, according to one person familiar with the plans who was not authorized to comment publicly.
Venu was announced with the intention of giving consumers access to a bundle of channels providing live sports at a lower cost than the traditional pay-TV subscription.
The platform, to be offered at $42.99 a month, is aimed at young sports fans who are bypassing cable and satellite services. Fox Corp. CEO Lachlan Murdoch has said the venture is expected to reach 5 million subscribers in its first five years.
Along with ESPN, the platform is planning to carry channels from Fox and its sports brands, as well as Warner Bros. Discovery’s Turner channels. It would give users access to NFL, NHL, Major League Baseball, NBA and numerous college sports packages carried by the outlets.
The deal with Fubo will also advance ESPN’s strategy to reach consumers outside of the traditional pay-TV universe. In addition to Fubo and Venu, the channel will be offered later this year in a stand-alone direct-to-consumer streaming product called ESPN Flagship, which will not require a pay-TV subscription.
While Fubo’s stock surged on the news, analysts suggested that the deal and the plans to push forward with Venu will further fragment — and perhaps frustrate — the sports audience.
Raymond James analysts Ric Prentiss and Brent Penter wrote in a Monday note to clients that pay-TV services (cable, satellite or streamers such as Sling or YouTube TV) that carry all of the major channels will still be the most practical choice for hardcore sports fans.
“We think the audience that will subscribe to a sports-focused service that does not have a ‘complete’ sports offering will likely be niche,” the analysts wrote.
Robert Fishman of MoffettNathanson wrote that the deal may portend more moves in the streaming arena, especially since Fubo will remain as a free-standing publicly traded company. In a research note, Fishman suggested that the combined company could serve “as a vessel for further consolidation of sports and linear assets, including those owned by Disney.”
“Could this entity one day merge with Venu?” Fishman wrote. “What if we think even bigger like combining ESPN? And what about the future of Fox Sports’ streaming strategy? This is certainly getting far into the realm of speculation, but the deal certainly has an air of being merely step one of a larger plan.”
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Stephen Battaglio writes about television and the media business for the Los Angeles Times out of New York. His coverage of the television industry has appeared in TV Guide, the New York Daily News, the New York Times, Fortune, the Hollywood Reporter, Inside.com and Adweek. He is also the author of three books about television, including a biography of pioneer talk show host and producer David Susskind.
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