Disney deal barely clarifies its TV picture

FuboTV

08/01/2025 13:00

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Jennifer Saba
       NEW YORK, Jan 7 (Reuters Breakingviews) - Walt Disney
 DIS.N  is changing some channels, but shareholders are watching
the same show. The entertainment conglomerate unveiled plans to
inject its struggling Hulu Live TV bundle into the $2 billion
owner of rival streaming service FuboTV  FUBO.N . Although the
transaction helps clear the way for a separate sports-package
joint venture, the fast-fading broadcast television problem
lingers.
    Fubo provides Disney boss Bob Iger with some marginal help.
It has 1.6 million customers, and when added to Hulu Live’s 4.6
million, the combined company will creep closer to the video
subscriber base for incumbents such as Comcast  CMCSA.O . Disney
will own 70% of the enlarged venture, but is nevertheless hiving
off a business that analysts reckon is unprofitable. If nothing
else, it should help Iger achieve his target of generating an
operating margin of at least 10% by next year.
    Despite the promise of $120 million in annual synergies and
at least $7.5 billion of revenue by 2028, there’s no guarantee
the two struggling TV services will become stronger together.
Even post-deal, Fubo would lag YouTube and Sling, owned
respectively by web-search goliath Alphabet  GOOGL.O  and
satellite operator Dish Network. The business model also remains
quixotic. The more customers pay, the more the programming
costs. Fubo’s subscriber-related, broadcast transmission and
sales and marketing expenses chewed up all of its nearly $400
million in revenue in the third quarter last year.
    At the same time, $200 billion Disney is trying to start
another streaming service in partnership with Warner Bros
Discovery  WBD.O  and Fox  FOXA.O . Venu Sports is designed to
offer live programming from the three media giants. Last year,
Fubo sued the venture, but it’s dropping the case following the
offer of a cash settlement in connection with the Hulu deal. And
Iger plans to roll out a fully direct-to-consumer ESPN later
this year, meaning there will be three different sports-related
services managed or overseen by Disney.
    In addition to this confusing and redundant arrangement,
Iger faces the bigger problem of what to do about linear network
ABC and it stable of cable channels such as FXX. Operating
profit for the division that houses them fell 16% last year.
Warner Bros Discovery and Comcast are both preparing to separate
their legacy TV businesses. The Fubo deal, however, leaves the
picture at Disney frustratingly fuzzy.

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    CONTEXT NEWS
    Walt Disney said on Jan. 6 it would merge its Hulu + Live TV
with FuboTV, a rival streaming service and own 70% of the
enlarged company, which will continue to trade on the New York
Stock Exchange.
    As part of the transaction, Disney has committed a $145
million loan to FuboTV. Also, in conjunction with the agreement,
Fubo settled litigation related to Venu Sports, a joint venture
formed by Disney, Fox and Warner Bros Discovery. The owners of
Venu will pay Fubo $220 million in cash.
    Centerview Partners advised Disney on the deal, while Wells
Fargo and Evercore served as financial advisors to Fubo.

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 (Editing by Jeffrey Goldfarb and Pranav Kiran)
 ((For previous columns by the author, Reuters customers can
click on  SABA/ 
jennifer.saba@thomsonreuters.com))