Commentary

Virtual Pay TV: Virtually Something - But How Much?


There has been much discussion around the Disney-Fubo deal as relates to the planned sports-focused streaming platform Venu Sports. We now know that Venu Sports is no more.

The joint venture partners, Walt Disney, Fox Corp. and Warner Bros. Discovery, said in a statement: “In an ever-changing marketplace, we determined that it was best to meet the evolving demands of sports fans by focusing on existing products and distribution channels.” No specific details about the move were provided. 

Combining Fubo with Hulu+Live TV -- part of Disney’s deal to buy a 70% stake in Fubo -- may solve this to an extent. Fubo with its 1.5 million subscribers still posts cash-flow losses, at $110.1 million a year. Analysts say Hulu+Live TV (4.7 million subscribers) is barely profitable -- if at all.

On a deeper level, what really remains for those virtual pay TV provider businesses? On the surface, the virtual pay TV marketplace on the whole is not a major moneymaker.

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With its 1.5 million subscribers, Fubo still posts cash-flow losses, at $110.1 million a year. Analysts say Hulu+Live TV (4.7 million subscribers) is barely profitable -- if at all.

The rest of the marketplace doesn’t look all that strong either. Sling TV (and Dish Network) continue to post lower revenue and a yearly net loss of $1.7 billion. It also has seen its share of cord-cutting.

Currently, the only virtual pay TV leader is YouTube TV. With around 8 million subscribers, it appears to be in a better position. (The Fubo/Hulu combination will be second place to YouTube TV, with an estimated 6.2 million.)

MoffettNathanson Research co-founder and media analyst Michael Nathanson estimated the service would climb to profitability in 2024 -- with $200 million in operating profit. This comes after an estimated $300 million net-loss estimate the year before.

Better news is that YouTube TV is now the fourth-biggest pay TV provider -- virtual, traditional (cable, satellite), or otherwise -- while Charter and Comcast each have around 13.5 million subscribers, and DirecTV has around 11 million.

What does all this mean? It seems that digital-based media giant Google, the dominant search engine in the U.S., has broader goals beyond YouTube TV and its current 8 million TV homes.

That is only less than one-tenth of all U.S. TV homes -- which are at 125 million, according to Nielsen.

It's good news that cash-rich Google is not dependent on needing rapid profitability or growth to become the dominant pay TV player.

With other regulatory concerns looming for the digital media company, this modest pace may work well.

The positive element is that analysts have talked up the idea that there will always be room for legacy pay TV network retailers -- virtual or traditional platforms. These are U.S. traditional TV subscribers-- mostly older consumers -- who want to retain a cable TV-like service, giving them a familiar feel of live, live TV.

Virtual pay TV platforms also can give those consumers that. Is that where Hulu/Fubo or YouTube TV come in?

To an extent, Disney’s move seems to be what other legacy media companies have been doing or considering -- spinning off old line businesses, like cable TV networks. This is something Comcast is currently doing and  Warner Bros. Discovery may be moving toward.

Expect other cracks in the TV ecosystem. Cord-cutting is still a thing for all types of pay TV. Will Comcast and Charter find a way to perhaps merge their pay TV systems -- in a spinoff as well?

What is the virtual end game here -- or in reality?

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