Streaming businesses, for the most part, aren't yet profitable. While Netflix has found out a way to make its business work, others are still struggling. One way for them to potentially overcome those obstacles is by joining forces.
A recent deal that could transform the streaming wars is a huge joint venture involving Fox, Warner Bros. Discovery, and ESPN, which Walt Disney owns. The companies plan to launch a sports-focused streaming platform which could be available later this year.
While this could help improve those companies' growth prospects, it could also undermine the potential for another streaming business: fuboTV(NYSE: FUBO). Shares of fuboTV have been under immense pressure as the stock has collapsed 94% in just three years.
Does news of this joint venture seal the deal for the struggling streaming stock? Is fuboTV stock headed for disaster?
Why the joint venture is a big problem for fuboTV
There are two clear problems that the joint venture presents to fuboTV. The first is that since it includes three top names in the industry, customers could have access to a much broader and more comprehensive streaming option than fuboTV currently offers.
The second challenge is that it could drastically undercut fuboTV. While there hasn't been a formal announcement, there are rumors and speculation that the price could be $50 or less per month. In comparison, fuboTV's cheapest plan costs $79.99 per month. And a big downside for hardcore sports fans is that many streams are limited to 720p, which isn't optimal for people with 4k-enabled TVs.
Struggling fuboTV isn't going down without a fight
The prospects of the joint venture aren't sitting well with fuboTV's management. The company has filed an antitrust lawsuit in hopes that it could stop the companies from coming together. CEO David Gandler wants a level playing field. "We assert that this JV is an attempt to monopolize the sports streaming industry and eliminate competition," he said.
Whether the lawsuit is successful could ultimately determine the fate of fuboTV and whether it will be a viable streaming option in the future.
Is the writing on the wall for fuboTV?
Even if fuboTV is able to block the joint venture, that still may not solve its core problems. Consider that for the last three months of 2023, the company generated $410 million in revenue, up 28% year over year, and yet fuboTV still incurred an operating loss of $72.1 million. At an already high price point, the company still isn't able to turn a profit.
Although its losses have shrunk over time, the business still has a long way to go to reach breakeven. Over the past 12 months, it has also used up over $177 million to fund its day-to-day operating activities as cash burn remains a big problem for the business.
The lackluster fundamentals at fuboTV suggest that joining forces may be the best option for streaming companies, particularly those focused on sports, to pursue. Rather than trying to block a deal, the company may be better off finding a way to be part of the joint venture.
Is fuboTV done for?
If the joint venture goes through and the price does come in lower than fuboTV's offerings, there would be little reason to remain optimistic about the company's future. Without a superior offering and a higher price point, it may only get more difficult for fuboTV to grow its subscriber base while also having any hopes of breaking even.
The stock is looking at big troubles, and unless the joint venture falls through or fuboTV finds a way to become a part of it, investors are better off avoiding this beaten-down streaming stock. Things may only get worse for fuboTV from here on out.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix, Walt Disney, Warner Bros. Discovery, and fuboTV. The Motley Fool has a disclosure policy.
