TV Is Dead, Long Live Connected TV (Part 3): Digital First TV

0 | By Alex Kagin

Streaming services have experienced rapid growth in adoption over the last five years. And while almost 80% of U.S. households have some form of device for streaming video and subscribe to a streaming service, many of them still pay for access to cable.

A big part of this is that sports and news content have been a key driver for cable operators. Most streaming subscription services have chosen to focus only on entertainment offerings.

While traditional TV has suffered at the hands of newer services like Netflix, Hulu, and HBO, some people will never stop watching TV in that fashion.

Sometimes, you just want to sit down and channel surf live TV, turn on the news, or watch sports.

Just like 10 years ago, when I would come home from work and flip on the TV, I do the same today. But I don’t need a cable subscription to watch traditional TV. Many still want this, which is why we’re seeing services pop up from many big companies replicating traditional TV.

Alphabet Inc. (GOOGL) has YouTube TV, DISH Network Corp. (DISH) has SlingTV, and Walt Disney Co. (DIS) has Hulu+ Live TV. This can all happen without plugging in a bulky cable box. All you need is an Internet connection. The best part is you don’t need to be tied to the TV. You can watch on your tablet and phone, on the go, or at home.

While there are many choices out there to watch traditional TV through digital means, I want to focus on a newer player. This one is taking a new approach to traditional TV.

This Connected TV Stock Quietly Rules Sports

You may have not heard of them, but today I want to talk about FuboTV Inc. (FUBO). Launched in 2015 as a soccer streaming service, Fubo quickly saw the interest in a sports-centric network and with cord-cutting accelerating. It pivoted to an all-sports service in 2017 and then to a virtual multichannel video programming distributor (vMVPD).

Now, in 2020, as a publicly-traded company, it has one of the largest selections of live content with one of the leading live sports packages in the market. That is impressive given the size of some of Fubo’s competitors.

Just like a typical cable company, FuboTV makes its money in the same way, through subscriptions and advertising revenue. The benefit here, as with The Trade Desk Inc. (TTD), is that ad dollars are moving to connected TV as advertisers are better able to target customers. As that happens, more customers are moving online for advertisers to reach their audience.

Fubo’s financials reveal potential growth ahead as well…

How Fubo Fares in the Streaming TV Market

In the first three months of the year, revenue was roughly 51 million, up 78% year over year. Advertising revenue was up 120%. In the second quarter of the year, during the pandemic, ad revenue stayed flat, showing the strength of the business.

With the tag line “come for the sports, stay for the entertainment,” FuboTV has used the demand for sports to acquire subscribers and retain those customers with its large lineup of live sports and entertainment.

This company is just getting started. As of June 30, 2020, FuboTV had 286,126 subscribers, increasing approximately 47% year over year, despite the cancelling of virtually every sport amid COVID-19 concerns.

Now that sports are back, the company has increased the expected number of subscribers for Q3 2020 from the 340,000 to 350,0000 range to 370,000 to 380,000. With a compelling OTT offering, it is looking to capitalize on the large and growing base of cord-cutters looking to replicate their cable product.

While many businesses have slowed during the pandemic, FuboTV cut deals and continued to work on its product. It announced a multiyear distribution deal with Disney to bring ESPN to its service along with other Disney channels. Fubo started offering its service on Xbox and launched Fubo Sports Network on PlutoTV. This has all led to improved viewership hours, which have gone up 4x since the first quarter of 2018. Now that live sports are back, this should continue to improve.

While FuboTV is currently trading on the OTC market, it recently announced intent to uplist. The company’s common stock has been approved for listing on the NYSE. This could bring a lot of interest. With companies like Disney, AMC Networks, and Comcast being large owners of the company, this could be the time to invest.

The connected TV universe is a monumental shift and one that doesn’t look to be slowing down. Two hundred million connected TVs were sold last year. Roku Inc. (ROKU) has over 50 million devices in use, and Inc.’s (AMZN) Fire TV platform has over 40 million users. Millions more are on the dozens of other connected devices from some of the world’s largest technology companies.

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