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(Bloomberg) -- Walt Disney Co. agreed to merge its Hulu + Live TV streaming service with the online sports-focused company FuboTV Inc., creating the second-biggest digital pay-TV provider.
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Under the transaction, Disney will fold Hulu + Live TV business into Fubo, creating a new venture that will be 70% owned by Disney and the rest by Fubo, Disney said in a statement on Monday, confirming an earlier Bloomberg report. With a combined 6.2 million subscribers in North America, the new venture will trail only YouTube TV.
The deal doesn’t include Hulu’s subscription video business, in which customers pay a fee to stream a catalog of content at their leisure. The TV venture will continue to operate under two brands: Fubo and Hulu + Live TV.
Fubo co-founder and Chief Executive Officer David Gandler will operate the newly combined Fubo and Hulu+ Live TV business.
“This combination enables us to deliver on our promise to provide consumers with greater choice and flexibility,” Gandler said in the statement. “Additionally, this agreement allows us to scale effectively, strengthens Fubo’s balance sheet and positions us for positive cash flow. It’s a win for consumers, our shareholders, and the entire streaming industry.”
Shares of Fubo more than tripled on Monday to as high as $4.99, the biggest jump since January 2018. Disney gained as much as 1.5%. Fubo, which had a market value of about $481 million on Friday, will remain publicly traded. As the smallest virtual TV operator, it has faced challenges including expensive programming and subscriber churn.
Fubo is a virtual multichannel video programming distributor, which means it offers live TV channels over the internet as opposed to over cable, satellite or fiber. Hulu’s Live service, an alternative to cable TV, lets users stream from roughly 100 live TV channels including sports, news and shows.
Combining the services should position the venture to attract subscribers as customers look for online alternatives to cable TV.
In connection with the transaction, Disney will enter into a new carriage agreement with Fubo that will allow Fubo to create a new sports and broadcast service, featuring Disney’s sports and broadcast networks, including ABC and ESPN. Fubo also has the potential to create skinnier sports news and entertainment bundles according to consumers’ taste, executives said on a call Monday announcing the deal.