Why Disney Bought Fubo
Making sense of the latest acquisition in the media and entertainment world
Welcome:
Welcome back to State of Play! I know it’s been a minute since I’ve been here, but it’s a new year and I’m recommitting to the newsletter. I have been thinking - and honestly moping a bit - about how I have a lack of hobbies. Some of this is understandable, I have 2 little kids for goodness sake. My job is taxing. I’m tired!
But then I watched this talk about finding what you’re made for and trying to dig in to whatever that may be. I realized that State of Play is my hobby, that I like doing it, and that I’m good at it. I had stopped writing against my better interest. So even if it isn’t every week or biweekly, I’m going to be popping in with more frequency.
I’ll share more about what I’ve been up to in the coming weeks, but for now let’s dig into the latest media merger.
One Big Trend: Hulu + Fubo TV
Photo by Possessed Photography on Unsplash
Honestly, I did not see this one coming. Earlier this week it was announced that Disney and Fubo were combining their “skinny bundle” services, known as vMVPDs in industry parlance. Put simply, Fubo TV and Hulu + Live TV are now one organization that is 70% owned and fully controlled by The Big Mouse. Hulu the streaming service is not part of the deal.
This is interesting for a few reasons. For one, it means Disney has some belief in skinny bundles as a sustainable business, at least for the time being. The new company will have 6.2 million subscribers, making it the second biggest vMVPD provider behind only YouTube TV.
Fubo has differentiated itself as being the skinny bundle that cares the most about delivering sports to its users. That will continue as a part of Disney, which of course houses ESPN. One can likely assume that ESPN+ and the forthcoming “ESPN Flagship” streaming service - the one that will actually show content from ESPN and not like, Irish darts tournaments - will be part of the Fubo + Hulu + Live TV package.
Much of the reporting around this deal has pointed out that it also involves Fubo dropping its lawsuit against Venu, the new sports-centric streaming service that Disney, Warner, and Fox are creating together. That is happening, but I don’t think it matters at all. Venu will launch but no one will want it, especially with the NBA leaving Warner and Fubo becoming part of Disney. The audience for Venu at its price point of $40 was always going to be kind of small. This merger makes it infinitesimal.
Disney has had its struggles, but it’s a smart company. I’m not sure why they agreed to Venu in the first place, but after really taking a long, hard, look at it they must have realized it was going to be a dud and started to look at other options. Acquiring Fubo was one of those, as it allows them to grow into live sports streaming with an established partner and solves the more challenging part of their Hulu problem.
What problem is that, exactly? Well, Disney has been slowly but surely shoving all of its streaming content under the umbrella of Disney+. Hulu, for example, is now a tab on Disney+. While the company was initially worried about diluting its family friendly brand with shows like American Horror Story and The Handmaid’s Tale, those worries have subsided as time has gone on and consumers have become more familiar with streaming services and how they function. Even as Disney+ has started to absorb Hulu’s content, though, its somewhat diluted brand has awkwardly remained.
But that issue will diminish gradually with the passage of time. A larger issue was what to do with the shockingly successful vMVPD aspect of Hulu, Hulu + Live TV. Now, Disney has split it off into Fubo world and given it to the Fubo team of executives, who helped Fubo maintain success in a difficult environment and often punched above their weight.
YouTube TV, the largest skinny bundle around today, is funded by YouTube’s massive ad business and, ultimately, Google/Alphabet. They have almost infinite money. Competing and surviving in such an environment is hard! Skinny bundles did well for a little while as the first wave of people fleeing cable fell into the nascent world of streaming, but that success didn’t last. Prices had to go up as negotiations with media companies got more difficult. Skinny bundles fell by the wayside. While YouTube TV is dominant, 2 of the other most prominent vMVPDs have now united and are likely to give YouTube TV a run for its money in the space.
Why should you care?: The key to success in the new media environment is creative dealmaking and strong execution. This deal was surprising, but it makes a great deal of sense! It should lead to success for Disney, and it’s a real testament to the Fubo leadership team that they were able to thrive in a challenging environment and have now been rewarded with an exit.
The only sad thing is that the Hulu brand - the media and entertainment world’s little engine that could - is taking one more step toward being shelved forever. Please don’t mind the single tear rolling down my cheek for my favorite misfit toy.
Have a great rest of your week!
IRISH DARTS IS ELECTRIC!