Earlier this week, T-Mobile (NASDAQ: TMUS) announced a new partnership with Alphabet‘s (NASDAQ: GOOG) (NASDAQ: GOOGL) Google, partnering with the search giant on a number of cross-promotions, while also inking an exclusive discount on YouTube TV for T-Mobile customers. In conjunction with the announcement, T-Mobile also said it would be shutting down its nascent TV product, T-Vision.
Neither the new T-Mobile-Google partnership nor T-Mobile shutting down T-Vision is good news for recent market darling fuboTV (NYSE: FUBO).
A wide-ranging partnership
The T-Mobile-Google partnership is fairly broad across a wide range of Google products, with T-Mobile making Google messaging the default rich messaging service for T-Mobile’s Android phones. T-Mobile will also use Google One cloud storage to back up and transfer mobile data to new Android phones it services in its stores. Additionally, T-Mobile will expand the number of Google Pixel phones and devices it sells and promotes.
In return, Google is giving T-Mobile customers some nice discounts on several video and subscription services. Customers will now get $10 off YouTube TV, (for $54.99, down from $64.99) or skinny bundle alternative Philo for $10 (normally $20). Existing T-Vision customers will get a month free before switching as a thank-you. T-Mobile is also offering three free months of YouTube Premium (normally $11.99 a month).
T-Vision wasn’t meant to be a money-maker for T-Mobile, but rather a way to bundle wireless phone plans today and potentially 5G home broadband in the future. In a blog post, CEO Mike Sievert admitted that management had learned customers were overwhelmed with streaming choices, and that T-Vision’s software provider ran into some “financial problems.”
In any case, a discounted YouTube TV will join T-Mobile’s Netflix “on us” promotion — a pretty strong combination for those looking to switch mobile providers. Given that T-Mobile appears to be on pole position in the 5G race over legacy providers, these partnerships could be massive win-wins for all involved.
While it would have been nice to have a streaming TV business, it’s hard to know if T-Vision would have ever been profitable for T-Mobile. Meanwhile, the company may very well achieve the same customer acquisition goals through this Google partnership.
But it’s bad news for fuboTV
The losers of this new partnership are likely the other telecom providers competing with T-Mobile, as well as fuboTV. Fubo, which has billed itself as a “sports-first” streaming video bundle, made waves after going public last October, racking up lots of subscribers during the pandemic year. Its stock price more than sextupled in a short amount of time, before correcting more recently.
Currently, fuboTV has around 548,000 subscribers, up 73% from the prior year, but still well behind Hulu + Live TV (4 million subs), YouTube TV (3 million-plus), and Sling TV (2.5 million). While Fubo bills itself as a “sports-first” offering, each of these services have pretty similar channel lineups.
In fact, you can see how fuboTV and YouTubeTV channels compare here. As you can see, they’re fairly similar, with some differences around peripheral, less-sports-oriented channels. FuboTV even lacks the Turner stations owned by Time Warner like TBS and TNT, which have a fair amount of NBA and college basketball games, and it also doesn’t have CNN. That means fuboTV subscribers are already missing Stanley Tucci eating his way through Italy! Quite a disadvantage.
Both services until recently went for the same price of $64.99, but with YouTube TV now offering its services for $54.99 to T-Mobile subscribers, it could lure away current or potential fuboTV subscribers. After all, T-Mobile has about 30% wireless market share today, and could be poised to take even more in the 5G era. The company currently has a 5G coverage lead that’s unlikely to change over the next few years, and the lure of free Netflix and discounted YouTube TV could also spur a bigger migration. Should that happen, fuboTV, already struggling with its margin profile, could be under intense competitive pressure.
T-Vision shutting down isn’t a great sign either
Some may think T-Vision shutting down would be a positive for fuboTV as it eliminates a potential competitor. I think it’s the opposite. Shutting T-Vision down and replacing it with YouTube TV only strengthens an already stronger competitor. Meanwhile, the fact that T-Mobile shut down T-Vision after just six months means there probably isn’t a whole lot of profit opportunity in the bundled over-the-top (OTT) business, when you don’t own any content and you can’t cross-bundle.
If a company as big and strong as T-Mobile can’t compete in the space, what potential does fuboTV have? With a relatively commoditized offering and large competitors that can afford to sell its packages at low to no margins to drive sales of other products, Fubo, which is already down over 22% on the year, could have more difficulties ahead.