Streaming pay television service Fubo has agreed to drop its antitrust lawsuit against the Walt Disney Company by selling out most of its business.
On Monday, the companies announce an agreement that merges Disney’s pay television business Hulu with Live TV (stylized as Hulu + Live TV) with that of Fubo, creating a new company that will be 70 percent controlled by Disney when the dust settles.
The company, tentatively called “NewCo,” will be led by Fubo executives, with Fubo remaining as a publicly-traded organization and owning 30 percent of the new venture. The plan also calls for Fubo to settle its lawsuit against Disney over the formation of Venu Sports by accepting a $220 million cash payment from the three broadcasters backing Venu Sports — Disney, Fox Corporation and Warner Bros Discovery (WBD) — as well as a $145 million term loan paid by Disney next year.
David Gandler, the current CEO of Fubo, will serve as the chief executive of the newly-formed pay TV company when Fubo and Hulu with Live TV merge. He previously warned that Venu Sports would force Fubo into bankruptcy because it allowed sports fans to watch live channels from the three broadcasters without having to pay for entertainment and news channels that drive up the cost of comparable pay TV services.
For months, Gandler and others at Fubo complained that Venu Sports was anticompetitive because the three joint venture participants were affording it more-favorable distribution terms compared to what other cable, satellite and streaming pay TV platforms were forced into in order to carry highly-sought sports or sports-inclusive channels like ESPN, Fox Sports 1, TNT and TBS.
Gandler and company changed their tune on Monday, saying the combined Fubo and Hulu with Live TV business will allow Disney to move forward with Venu Sports in a way that provides “greater choice and flexibility” to sports fans.
As part of the pact, Fubo will oversee a new “Sports & Broadcast service” that will feature Disney’s sports and broadcast TV networks, including the ESPN multiplex of channels and ABC. As described, the formation of the business sounds similar to Disney’s plan to launch a new streaming service that offers ESPN channels over streaming, which is tentatively scheduled to debut later this year.
Less clear is whether Fubo will have any direct stake or operational control over Venu Sports, which is still far from certain. While Fubo may be moving on from its antitrust suit by allowing Disney to buy out most of its service, the company set the stage for another pay TV operator to launch a similar challenge of its own. The combination of Fubo and Hulu with Live TV could invite similar legal challenges from broadcasters and competitors down the road, and the deal is contingent upon receiving clearance from Wall Street and federal regulators, neither of which are guaranteed.
Should Fubo and Disney manage to stave off legal challenges and receive the regulatory blessings they need, the combined streaming pay TV company could serve over 6 million subscribers, making it the second-biggest virtual multivideo programming distributor (vMVPD) on the market, behind only Google-owned YouTube TV.
Fubo and Hulu will remain separate offerings, the companies affirmed, and Hulu’s on-demand app will remain available to purchase without a pay TV subscription.
