T-Mobile teams up with Google, and that’s bad news for fuboTV
Earlier this week, T Mobile (NASDAQ: TMUS) announced a new partnership with Alphabet‘s (NASDAQ: GOOG) (NASDAQ: GOOGL) Google, partnered with the search giant on a number of cross-promotions, while also giving an exclusive YouTube TV discount to T-Mobile customers. Along with the announcement, T-Mobile also said it would shut down its nascent TV product, T-Vision.
Neither the new T-Mobile-Google partnership nor the T-Mobile T-Vision shutdown is good news for the recent darling of the market fuboTV (NYSE: FUBO).
A large-scale partnership
The T-Mobile-Google partnership is broad enough for a wide range of Google products, with T-Mobile making Google Mail the default rich messaging service for T-Mobile Android phones. T-Mobile will also use Google One cloud storage to back up and transfer mobile data to the new Android phones it serves in its stores. Additionally, T-Mobile will increase the number of Google Pixel phones and devices it sells and promotes.
In return, Google is giving T-Mobile customers big discounts on several video and subscription services. Customers will now get $ 10 off YouTube TV (for $ 54.99, down from $ 64.99) or the alternative to the Philo slim plan for $ 10 (normally $ 20). Existing T-Vision customers will receive a free month before switching as a thank you. T-Mobile also offers three free months of YouTube Premium (normally $ 11.99 per month).
T-Vision was not meant to be a money generator for T-Mobile, but rather a way to bundle wireless phone plans today and potentially 5G home broadband in the future. In one blog postCEO Mike Sievert admitted that management has learned that customers are overwhelmed by streaming choices and that software vendor T-Vision has experienced “financial problems.”
In any case, a discounted YouTube TV will join that of T-Mobile. Netflix promotion “on us” – a strong enough combination for those looking to change mobile provider. Since T-Mobile seems to be activated pole position in the 5G race compared to traditional suppliers, these partnerships could be of tremendous benefit to all parties involved.
While it would have been nice to have a streaming TV business, it’s unclear whether T-Vision would ever have been profitable for T-Mobile. Meanwhile, the company could very well achieve the same customer acquisition goals through this partnership with Google.
But that’s bad news for fuboTV
The losers of this new partnership are probably the others telecommunications providers competing with T-Mobile, as well as fuboTV. Fubo, which billed itself as a ‘sport first’ streaming video set, made waves after become public last October, accumulating many subscribers during the pandemic year. Its share price has more than six-folded in a short period of time, before correcting itself more recently.
Currently, fuboTV has around 548,000 subscribers, up 73% from the previous year, but still far behind Hulu + Live TV (4 million subscribers), YouTube TV (3 million and over) and Sling TV ( 2.5 million). While Fubo presents itself as a “sport first” offer, each of these services has quite similar ranges of channels.
In fact, you can see how fuboTV and YouTubeTV stack up against each other. here. As you can see, they are quite similar, with a few differences around the less sports-oriented peripheral channels. FuboTV doesn’t even have Time Warner-owned Turner stations like TBS and TNT, which have a fair amount of NBA and varsity basketball games, and it doesn’t have CNN either. This means fuboTV subscribers are already missing out on Stanley Tucci making his way through Italy! Quite a drawback.
Until recently, both services were priced the same at $ 64.99, but with YouTube TV now offering its services for $ 54.99 to T-Mobile subscribers, that could attract current or potential fuboTV subscribers. After all, T-Mobile now has around 30% of the wireless market share and may be on the verge of taking even more in the 5G era. The company currently has a 5G coverage advance which is unlikely to change over the next few years, and the lure of free Netflix and discounted YouTube TV could also spur more migration. If this were to happen, fuboTV, already struggling with its margin profile, could come under intense competitive pressure.
The shutdown of T-Vision is not a good sign either.
Some may think that closing T-Vision would be positive for fuboTV as it would eliminate a potential competitor. I think it is the opposite. The closure of T-Vision and its replacement by YouTube TV only reinforces an already stronger competitor. Meanwhile, the fact that T-Mobile shut down T-Vision after just six months means that there probably aren’t a lot of profit opportunities in the over-the-top (OTT) bundle business, when you don’t own any content. and you cannot perform grouping.
If a company as big and strong as T-Mobile can’t compete in space, what potential does fuboTV have? With a relatively unmarked offering and large competitors who can afford to sell its packages at low or no margins to drive sales of other products, Fubo, which is already down more than 22% on the year, could have more difficulty coming.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.