Walt Disney Co. and FuboTV Inc. Combine Their Online Live TV Operations, Creating the Second-Largest Digital Pay-TV Provider in North America

With 6.2 million subscribers, this merger strengthens Fubo's position in the competitive streaming industry, which has been grappling with high programming costs and challenges in subscriber retention.

Walt Disney (NYSE:DIS) and FuboTV (NYSE:FUBO) are combining their online live TV operations in a move that will create the second-largest digital pay-TV provider in North America, a major development in the streaming industry.

With 6.2 million subscribers, Fubo is struggling in the competitive streaming industry, which is grappling with high programming costs and challenges in subscriber retention. But Disney, the entertainment giant, is stepping in to help Fubo scale up.

Under the deal, Disney will maintain a majority stake of 70% in the newly formed entity, which will continue to operate under both the Fubo and Hulu + Live TV brands. Notably, the deal does not include Hulu's on-demand streaming service, keeping that component of Disney's operations separate.

This strategic move aims to offer consumers more choice and flexibility while enhancing the market standing of both brands.

After the announcement, Fubo stock soared nearly 200%, reaching $3.99 at the New York open on Friday, March 31. This marked the company's biggest jump since January 2018. Disney shares also saw an uptick, rising by 0.7%, reflecting the positive market reaction to the merger.

David Gandler, FuboTV co-founder, will become the CEO of the combined company, which will be positioned as the second-largest player in the digital pay-TV market, trailing only YouTube TV in terms of subscribers.

"This transaction will enable FuboTV to scale effectively, and combined with our anticipated strong 2023 financial performance, will strengthen our balance sheet and ultimately position us to achieve positive cash flow," Gandler said in a statement.

"Our combined team will be able to create a more powerful entity, capable of competing with larger players in the space."

One of the most significant components of the merger is Disney's commitment to help Fubo secure a new carriage agreement, which will allow Fubo to offer a sports and broadcast service featuring Disney networks, including ABC and ESPN.

Currently, Fubo offers a service that streams over 55,000 live sporting events annually, making it a go-to platform for sports fans.

As part of the agreement, Disney and Fubo have resolved ongoing litigation between Fubo and Venu Sports, a planned streaming platform backed by Disney, Fox Corp, and Warner Bros. Discovery.

According to the settlement, the Venu partners will pay Fubo $220 million, and Disney will provide an additional $145 million term loan in 2026, which will be used by Fubo to bolster its growth.

This financial settlement strengthens Fubo's position and allows the company to focus on growth.