Disney, Fubo TV & "Portfolio Reconstruction"

华特迪士尼公司 and Fubo TV, a sports-focused virtual cable network (vMVPD),?announced this morning?they will combine Hulu + Live TV with Fubo’s operations in a joint venture. As part of the deal, Fubo will drop its antitrust lawsuit against Venu Sports, the sports-focused streaming package from Disney, Fox Corp. and Warner Bros. Discovery.

I wrote a few pieces on Fubo vs. Venu last summer:

• The Pain Point Is Recurring Revenues, The Solution Is...?
• David’s Choice / The Davids’ Choice
• Disney, Fox, Venu Sports, DirecTV & The Doom Loop of The Mogul

In the last piece, I warned of a "lurking danger" in the Venu Sports lawsuit: The management teams at 华特迪士尼公司 , Fox Corporation and Warner Bros. Discovery believe building "walled gardens" is more valuable than decentralizing their business models.

Today's deal weakens Disney's streaming walled garden by handing over Hulu + Live TV to a third party. For context, Hulu + Live TV represented 43% of all Hulu revenues in Q4 2024.

The move is also an example of something I described as "portfolio reconstruction": "if management cannot optimize shareholder value across unrelated assets, then they should either discard those assets or find managers who do understand how to connect them in ways that audiences want."

Here, Disney is handing the management of Hulu + Live TV over to Fubo TV managers who have experience in running a vMVPD business. Disney has not been able to substantially grow the Hulu + Live TV subscriber base since 2020 nor average revenue per user since 2021.?

It is unclear where Fubo TV management are better positioned to do so.

The Disconnect

The deal terms exposes a contradiction: vMVPDs are not strategically important to Disney but it is still embracing Venu Sports. Both are bundled packages of cable channels.?The difference is Venu's narrower focus: It bundles virtually all of the U.S. national sports broadcast rights controlled by Disney, Fox and Warner Bros. Discovery in a single subscription, with limited entertainment and news content.

Venu publicly projected at least 5 million subscribers in five years, but evidence revealed in the Fubo TV trial suggested these numbers were conservative. As I wrote?last September:

"[A]s imagined, Venu seems to be a desperate bid to preserve and grow recurring revenues at a low churn rate—assuming sports viewing has inelastic demand—by any means necessary.?Effectively, a group of TV executives narrowly defined the solution to their expensive rights deals as network television distribution over the Internet. But, as their failures in streaming have proven, the Internet is a different medium that?favors other media formats and pricing models."

This raises a reasonable question for Disney management: Does it or does it not still believe in the cable channel as a core value proposition of a streaming business?

The decision to spin out Hulu + Live TV suggests no. But, its deal-making on behalf of Venu Sports suggests it does.?

The Netflix Effect

Last November, I argued Netflix?redefined sports distribution?with its livestreamed Paul vs. Tyson boxing match. On Christmas Day, it redefined the standards for professional sports distribution with its broadcasts of two NFL games.

Netflix?reported?"a record-breaking day for Netflix and the NFL, with an unduplicated audience of nearly 65M US viewers, according to Nielsen." It added that viewers from 218 countries and territories tuned in to at least one of the games.

In other words, a substantial number of U.S. viewers did not associate a NFL broadcast with a cable channel but with an app. That seems to be both good news and bad news for Venu Sports.

The good news is that it suggests an app can indeed be a destination for audiences to stream a live broadcast at scale. The bad news is, it is unclear why Venu Sports—especially with its continued focus on cable channels—will be a competitive offering.

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