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For the first time in 3 years, YouTube TV (GOOG) (GOOGL) raised its monthly service charge from $64.99 to $72.99. This is good news for fuboTV (NYSE:FUBO) as it will bring Google's offering closer to fubo's pricing.

fuboTV

The bad news is the economics of fubo's business and streaming in general are still really bad.

Take for example the Q4 for fuboTV. During the quarter you had the World Cup, the stretch run of the NFL season and fuboTV was able to deliver 39% Y/Y growth on the revenue side.

fuboTV Q4 Investor Presentation

The problem is subscriber related expenses - or content costs - rose in near lock-step up 37% Y/Y.

To fuboTV's credit, other expenses normalized a bit, including a welcomed 36% decline in general and administrative costs.

Overall, the company had an operating loss that essentially equaled the prior period at $93M despite the strong revenue growth.

Obviously the bull case for fuboTV is the company will scale up the subscriber numbers over time where the company could potentially leverage that in negotiations on the content side. However, given the fact the company had to drop local CBS affiliates from most markets might indicate the company doesn't have the scale to get networks to budge off a price.

That being said, management indicated on the company's Q4 conference call that fuboTV hadn't seen much impact from the move that simply cuts off local CBS news, not the national feed.

TV carrier and broadcast network price disagreements are as old as time. The more recent phenomenon is the fact most broadcast networks have a direct-to-consumer offering, which will make networks likely less worried about distribution.

As it relates to fuboTV, the company is going to be locked in a low-margin business and the only real way to close the gap is through advertising. Over the past year advertising revenue grew 37% from $73.7M to $101.7M.

Certainly nice growth on the advertising revenue side, but fuboTV doesn't exactly have the financial runway to steadily grow the advertising business. The company burns through cash given the weak operating leverage on the content side.

Over the past year the company burned through nearly $290M on the operating side, and that strips out about $27M from some discontinued operations ... so the grand total is actually higher.

The company is financing the loses via an at-the-market stock offering, which came in at $292M. The obvious problem is that's incredibly dilutive to shareholders - especially when the shares trade at such a low level like fuboTV's do.

fuboTV Q4 Investor Presentation

The good news is fuboTV likely has enough on the balance sheet to finance the next year, but obviously once the company gets into Q3/Q4 the next round of financing would likely need to come in.

fuboTV has already telegraphed 2023 revenues coming in $1.22B-$1.25B or roughly 22-25% higher than 2022. It seems unlikely that fuboTV will gain any significant competitive advantage against YouTube TV, Hulu, or traditional cable providers to become the go-to streaming service.

The last time I examined fuboTV the valuation was closer to $1B, since then the stock has declined 79% to reach today's valuation closer to $275M.

A buyout is always an option, but likely not from a traditional media network. CBS (PARA), Disney (DIS), etc already have streaming technology and use fuboTV as a revenue source. It's possible with fubo's sports focused content the company could be a target of a gambling or gaming company with eyes on sports betting tie-in. However, given the fact fuboTV scrapped plans for an integrated sports book, that seems like a farfetched plan as well.

Barring some kind of miracle acceleration in user growth, I believe there's simply no operating leverage with this business model. fuboTV is pinned to a pricing plan that stays in-line with competition and content costs will likely remain elevated, especially on the live sports side.

Google can afford to have YouTube TV scale up over time. The company also is dominant in advertising, owns one of the world's largest networks of cloud servers and has access to a large user base. Financially fuboTV doesn't have the runway to compete long-term and I expect it will be forced to dilute shareholders or hope a buyout materializes. Even at the depressed valuation, it doesn't make fuboTV an attractive investment.

Read more here:
Google's Price Increase Won't Save fuboTV (NYSE:FUBO) - Seeking Alpha