- FuboTV (FUBO) announced it will increase prices by $5.
- Management believes its customers have a high willingness to pay.
- Other streaming companies have also increased prices, so FUBO stock still has long-term potential.
The last few months have been especially painful for investors in FuboTV (NASDAQ:FUBO). The once-high-flying growth play lost all momentum and is now on a downward tailspin. FUBO stock in November of last year was trading at a high of close to $35. Today it is in the $5 – $6 range.
So what exactly caused this slide? For one, the macro environment turned unfavorable for a lot of high-growth names. FUBO stock was no exception. The company routinely beat revenue expectations, yet Wall Street was concerned about the widening earnings gap.
Another reason is investors’ concerns about the overall streaming industry. Content costs have gone up industrywide. This primarily affects companies like FuboTV, which don’t own said content. So, how is the company dealing with these rising costs?
| FUBO | FuboTV | $4.85 |
FuboTV Raises Its Prices for Existing Customers
FuboTV recently announced that it will discontinue its $64.99 Starter Plan. Existing users will be automatically converted to its $69.99 Pro Plan. This effectively translates to a $5 price hike for a large portion of existing users. The company sent out a mass email informing affected members of the change.
To remove the sting a bit, the change to the Pro Plan will increase subscribers’ DVR storage from 250 to 1,000 hours and include a few new channels. I believe the company handled this as well as they could given the rising costs of content.
Ultimately, I feel this particular price increase will have a negligible impact on customer churn. The increase puts FuboTV’s live streaming option at the same price level as some of its competitors.
I really doubt a subscriber would cancel a particular live streaming service because of a $5 increase. Other companies such as Netflix (NASDAQ:NFLX) have also recently increased their prices by a similar amount.
Sports Fans Have a Higher Willingness to Pay
The recent price hikes across streaming services demonstrate that the initial era of low prices that platforms were able to charge was inherently unsustainable.
The question then becomes: Will this lead to customer churn? As I mentioned before, I believe this particular price change won’t. However, the question then remains: How much more can streaming services charge before consumers have had enough?
I don’t know the particular answer with regard to the streaming industry – but this metric could be a bit higher for FuboTV. Management believes that its subscriber base has a high willingness to pay for live sports content: the company’s bread and butter.
CEO David Gandler stated in an interview that FuboTV has the ability to raise prices for its customers:
“I do believe we have more pricing power. And in my opinion, the pricing or the packaging is really relative to what’s being charged in the traditional space, right? If you have 70 million customers paying $120 or in some satellite services, where it can go $160, $170, clearly, there’s room for us to be able to price up.”
The Verdict on FUBO Stock
Historically, sports fans have been willing to pay for live content. This bodes well for FuboTV, which is able to pass along the majority of these costs. The company continues to grow at a rapid rate.
The fact that FuboTV can pass content costs to its customers means it can eventually reach profitability. This is despite the last few quarters of earnings misses that have tanked FUBO stock. I believe as a high-growth play, it continues to be an interesting choice.
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On the date of publication, Joseph Nograles held a LONG position in NFLX. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
