The idea seems outrageous at first blush. In a recent interview with CNBC, fuboTV (NYSE:FUBO) CEO David Gandler estimated roughly 50 million U.S. households will be paying for digital cable TV in the foreseeable future, cutting the cord on the traditional delivery method -- and traditional cable providers.
Around 70 million U.S. households still pipe in their cable programming through the older, more conventional means as of last quarter, according to data from Leichtman Research Group. Conversely, Leichtman only counts around 6.8 million cable subscribers already plugged into the virtual, broadband-delivered sort of cable plans (excluding Alphabet's YouTube TV) that Gandler is referencing with his bold prediction. That's a far cry from 50 million.
Gandler further explained in the Aug. 18 interview that he expects his company to be serving between 3 million and 5 million of those digital cable households within five years, well up from fuboTV's current headcount of 682,000. That, too, is a bold outlook.
Except, given the cable market's current backdrop and trends already in place, it would actually be a bit surprising if Gandler's expectations weren't met.
A clear paradigm shift
fuboTV's target audience is called vMVPDs, short for virtual multichannel video programming distributors; the "virtual" part of the label just means the cable television service looks and feels like those offered by more traditional cable TV companies, but the video is actually streamed via an internet connection. Dish Network's Sling TV and the "Live" version of Walt Disney's Hulu are, like fuboTV, a vMVPD service. Conventional cable companies like Comcast and Charter's Spectrum that still rely on radio-based signals delivered using coaxial cable lines are of course just MVPDs, although satellite-based cable is also considered an MVPD service.
The roughly 10 million U.S. households currently subscribing to a virtual cable service are doing so for one key reason: the lower monthly cost. Hulu's and fuboTV's cable packages start out at around $65 per month, yet even adding a few bells and whistles doesn't pump their prices up to cable-like costs. A slimmer Sling TV package can be enjoyed for as little as $35 per month. All of them are priced at less than the effective cost of the nation's typical cable package, particularly after add-on fees. Consumer Reports research suggests the total monthly cost of cable service alone can easily exceed $100.
So given the cost-advantage of alternative forms of cable service, why isn't every cable-watching household in the United States making the switch?
Actually, consumers are finding vMVPDs at the expense of traditional cable service. Leichtman's data from three years back indicates less than 3.8 million U.S. households subscribed to an internet-based form of cable. The entrance and evolution of vMVPDs in the meantime has been well received. Nearly 10 million households are signed up for this sort of cable service now when including YouTube TV, which isn't part of Leichtman's vMVPD customer count.
Don't look for the trend to stop or even slow down anytime soon either. Survey data analyzed by consumer research outfit Parks Associates early this year indicated a whopping 43% of the country's current broadband subscribers also paying for traditional cable TV service were indeed planning to switch to a vMVPD within a year. In a separate report, Parks suggests that as soon as 2024 there will be 23 million vMVPD subscribers in the United States. The vast majority of them will be former customers of more conventional cable providers. The same Parks Associates research estimates there will only be 53 million traditional cable TV customers left in the U.S. by that time. That's a pool of 53 million households, of course, that fuboTV will be able to draw from en route to Gandler's call for as many as 5 million fuboTV subscribers.
Patience will pay off
Take all of these numbers with a grain of salt. Although virtual broadband-delivered cable television has been around for a while, it's still the early days for the industry and the underlying technological paradigm shift. Forecasts are still pretty broad, as the future remains a bit cloudy.
Even with the limited amount of forward-looking vision we have, however, we know enough to know the scope is enormous. Three million fuboTV subscribers -- and even 5 million subscribers -- feels a bit conservative given how many of the U.S. cable industry's customers have already made the switch, with roughly another 70 million still paying for conventional cable service. FuboTV shareholders just need to remember this is going to be a long-term project that's worth the wait.