Late last week (April 2nd), fuboTV, Inc. (a D-T-C live TV streaming service) and FaceBank Group (a virtual entertainment developer) announced that a merger of the two companies had been completed. The virtual MVPD player will leverage FaceBank technology and the company’s IP sharing relationships to enhance its content offering and to diversify revenue streams. The combined entity will do business as fuboTV (trading under the symbol OTC:FBNK); co-founder and CEO of the OTT provider, David Gandler, will hold the title of chief executive officer. Financial terms of the agreement were not disclosed, though it’s known FaceBank took out a “$110 million credit line for the transaction.”
Howie Long-Short: fuboTV is the David in a virtual MVPD battle with Goliath (see: Hulu, YouTube), so it’s certainly no secret that the company has been in need of capital. It’s fair to wonder why they opted to take it from FaceBank – a company with just a $214 million market cap (and without a ton of free cash), but with most of the money raised to date coming from competitors not particularly eager to continue funding a challenger (see: 21st Century Fox, Sky UK), fuboTV had to be open-minded as it looked for a strategic partner. FaceBank isn’t a household name, but was able to offer Gandler’s company the financing needed to press forward and as the CEO reminds “everything in this world is ultimately driven by finances.”
You likely do not know FaceBank Group by name, but it’s certainly possible you’ve seen their impressive work. The company developed the Tupac Shakur hologram that performed ‘live’ at Coachella with Snoop and Dre back in 2012 (MUST SEE). The digital entertainment content house also holds technology-driven IP for the likes of Floyd Mayweather, Muhammed Ali, Michael Jackson and Marilyn Monroe.
Capital aside, FaceBank brings something else to the table that fuboTV found valuable; experience on the production and IP side of the business. Gandler explained that “while [his company] specializes in the distribution of content and the technology behind streaming and AI, [it’s] not in the production space.” A reverse-merger with FaceBank (a company with the ability to produce shows and feature films) will enable fuboTV to “move further upstream into IP and digital production.”
Gandler believes that controlling valuable IP and producing future-form content “could open the door to some potentially lucrative revenue streams” (see: events, gambling). He says, “while everyone else [in the space] is retrenching, our goal is to build a major media company over the next 36 months.” How big can fuboTV get? The chief executive says it’s “probably one of the last media companies that can reach $1 billion of revenue organically. The market (think: cable TV/satellite subscribers) for a sports, news and entertainment live TV streaming platform is large and the ARPU opportunity is high.” We’re not so sure. If Rich Greenfield is right and the company has just 300,000 subs at $54.99/mo., they’re currently bringing just 1/5 of that total annually.
While the fuboTV programming lineup has a vast array of sports channels (despite having dropped the Fox RSNs and not carrying ESPN), it’s diversified enough that the sports hiatus has not resulted in a significant deterioration of the company’s customer base. Gandler explained that “while sports viewership has fallen off a cliff, [fuboTV has] seen a massive spike in news viewing.” In other words, the ‘bundle’ – which some insist is dying – has saved this virtual MVPD business (at least for now).
fuboTV would benefit from cord-cutting continuing to accelerate, but Gandler doesn’t believe the sports shutdown is going to spark that movement. “Sports are going to come back and in the meantime, subscribers want to see what’s happening with the pandemic on their local news stations. A time of crisis isn’t when you are going to see a precipitous drop in [cable] subscribers.” That said, a sustained recession could force price conscious consumers to finally make the switch to digital television.
$1 billion in revenue isn’t going to be an easy benchmark for Gandler & Co. to clear – even with the best global programming. While fubo may not be losing subscribers, it’s hard to believe the company is rapidly gaining them either in this environment. Significant top line growth is likely dependent on how successful the company can be monetizing FaceBank content.
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