FuboTV to shut down sportsbook as cash pile shrinks to $300M

Focusing on a "path to profitability," FuboTV, the sports-oriented streaming TV service, said this week that it will close down its Fubo Gaming subsidiary and cease operation of its Fubo Sportsbook service. However, at least one analyst wonders if that will be enough to keep the company afloat in the coming years.

In 2020, FuboTV placed a big bet on providing free games and a sportsbook that enables wagering. FuboTV argued that linking video content, interactivity and online wagering presented a "flywheel opportunity."

Today that view has changed significantly as FuboTV's gaming initiatives proved to be a drag on the business. With a new focus on profitability, FuboTV's board opted not to move forward with gaming because the company could not find the right strategic partner.

Figure 1: (Source: Zuma Press Inc./Alamy Stock Photo)

"While multiple parties expressed interest in the business, none of these opportunities would have allowed Fubo to lower its funding requirements and generate sufficient returns to shareholders," FuboTV explained in preliminary Q3 2022 results posted this week. "As a result, FuboTV will close its Fubo Gaming subsidiary and cease operation of its owned-and-operated Fubo Sportsbook effective immediately."

Subs grow as cash base erodes

While FuboTV's growing subscriber base is a bright spot, its overall financial situation, particularly with respect to turning the financial corner, is not.

In its preliminary Q3 2022 results, the company said it expects to end the period with more than 1.22 million paid subscribers in North America, up 27% year-over-year. It expects 350,000 in the "rest of world" (ROW), which includes Molotov, the French live TV service FuboTV acquired in late 2021. FuboTV had guided a range of 1.13 million to 1.15 million for North America, and a range of 340,000 to 360,000 for ROW.

FuboTV expects to close Q3 with North America revenue of at least $210 million, an increase of about 34% year-over-year, with ROW revenues of at least $5.5 million.

The company said it expects to post -$100 million of adjusted EBITDA along with a balance of cash and cash equivalents of at least $300 million. FuboTV ended Q2 2022 with $378.8 million in cash and short-term investments.

In an 8-K filing, FuboTV said it expects to "incur certain immaterial charges" in connection with the gaming-related decisions but also warned that it might incur further charges that it can't yet estimate.

FuboTV also noted that it expects to incur certain non-cash impairment charges of intangible assets and other noncurrent assets of approximately $70 million, "primarily relating to market access agreements, as well as to incur certain cash charges for the termination of certain contracts, the amount and timing of each of which cannot be further estimated at this time."

Fit to survive?

Making note of FuboTV's apparent burn rate from Q2 to Q3 2022 and the cash that remains in hand, Richard Greenfield, an analyst at LightShed Partners who has generally questioned FuboTV's prospects, wondered on Twitter if the company is fit to survive for the long run:

In January, Greenfield speculated that FuboTV could run out of cash sometime in 2023.

Even streamers are struggling in pay-TV biz

Gaming-related issues aside, FuboTV is competing in a market of virtual multichannel video programming distributors (vMVPDs) that includes YouTube TV, Dish Network-owned Sling TV, Hulu, Vidgo, Philo and DirecTV. The segment generated sluggish subscriber growth in Q2 2022 – adding a collective 42,000 subs versus a gain of 409,000 in the year-ago quarter – and did little to recapture the wave of subscriber losses coming from the struggling traditional pay-TV sector.

Naturally, FuboTV has a different view, believing it's on the right path.

"We're pleased with this expected performance, and our progress toward achieving our positive cash flow target in 2025," David Gandler, FuboTV's co-founder and CEO, said in a statement.

Gandler said that the company would provide more color and discuss its full Q3 2022 results on its scheduled earnings call on Friday, November 4.

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— Jeff Baumgartner, Senior Editor, Light Reading