Unprecedented Sports Access Is a Risk Factor Underlying fuboTV Stock

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About 18 months ago, the backdrop for live sports and TV content streaming service fuboTV (NYSE:FUBO) couldn’t have been more ominous. Aside from the human tragedy that is the novel coronavirus pandemic, the resultant shutdown of non-essential activities meant that professional sports leagues had to close operations. Of course, that represents the bread and butter of FUBO stock.

Flat-screen TV set displaying logo of FuboTV, an American streaming television service that focuses primarily on channels that distribute live sports
Source: monticello / Shutterstock.com

Fortunately, a healthy dose of ingenuity and common-sense practices enabled sports to come back later in 2020. Sure, the experience wasn’t the same. For one thing, people who lived through the public health crisis will have to explain to generations that weren’t born then why the world’s greatest athletes played in front of cardboard figures.

Still, that circumstance helped FUBO stock. When you can’t attend games in person, you might as well watch on TV. Plus, with people cutting the cord due to the suddenly unnecessary expense, prospective consumers found value in a sports-focused platform.

For proof, I look to our own Mark Hake’s recent positive assessment of fuboTV:

Last quarter, fuboTV’s total subscriber growth was 7.766% when total subscribers grew from 547,880 to 590,430. Based on this rate of quarterly growth, one could expect a 34.87% annualized growth rate. So on a run-rate basis, the company will have 796,300 subscribers. For simplicity’s sake, let’s call it 800,000.

Next, as the company had $69.09 in ARPU (average revenue per user) per month in Q1 2021, let’s assume it hits $70 in the next year. That gives the company $56 million in monthly revenue. Annually, that works out to $672 million in revenue. Adding $7.11 in monthly ARPU advertising revenue (the same as in Q1) brings in an additional $68 million in sales, or $740 million.

From Hake’s perspective, these metrics should be enough to make fuboTV free cash flow positive. But is it enough to take a shot with your hard-earned money?

FUBO Stock Suffers from an Underlying Pricing Problem

On the surface, the return of sports is an encouraging development for FUBO stock. In this year, we’ve seen the Super Bowl stage an excellent performance, while international tournaments like the rescheduled Euro 2020 and the 2020 Summer Olympics also support the bullish case for the streaming service.

At the same time, the biggest problem for fuboTV is that from a consumer’s perspective, the pricing is too high. Granted, the service could very well be competitive with similar offerings. But the issue is that fuboTV isn’t just a sports-focused service, where consumers could save money by only having sports channels.

Instead, the “Starter” service — the company’s cheapest offering — is $65 a month. Why so pricey? In addition to sports channels, members get non-sports related content networks, like TLC, VH1, USA and a host of other channels. When you’re just interested in sports, you don’t want to pay for these extras, which will be a lingering challenge for FUBO stock.

Moreover, streaming services today offer robust content that cater to one sport or league. For instance, I’m a fan of Formula 1 racing. So I took the offer of paying $80 or so to get an entire season’s worth of F1 racing. There’s just no way I’m going to pay $65 a month for content that I’m not going to watch.

I also decided to watch some baseball because I’m very intrigued with the Shohei Ohtani journey of being a modern-day Babe Ruth. MLB offers a streaming service that costs, if memory serves correctly, roughly $25 a month. That’s a great deal for me because I pay money to watch baseball and only baseball — not home gardening tips on TLC or whatever.

What About Football?

The counterargument is that ultra-popular leagues such as the NFL charge an arm and a leg for their products, whether in gameday tickets or TV rights or streaming services. If you’re a football fanatic, fuboTV might make sense. In turn, that would bolster the narrative of FUBO stock.

However, it’s also important to note that football viewership has been on the decline. In 2019, The Hollywood Reporter noted that “the league averaged 16.5 million viewers per game,” although the NFL “lost more than a million viewers per game.”

Last year, when quarantined viewers who had nothing better to do should have ramped up viewership for all kinds of live sporting events, the viewership figures were even worse: per-game viewership dropped to 14.9 million.

To me, it seems like the NFL is gradually losing its audience. In turn, other sports may be picking up the slack. And these sports offer much more competitive exclusive streaming services than fuboTV can ever dream of at its current business model. While I’m not opposed to some speculative interest in FUBO stock, conservative investors should be very careful.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2021/08/unprecedented-sports-access-risk-for-fubo-stock/.

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