Shares of FuboTV (FUBO 1.07%) got a shot of adrenaline on Jan. 6, 2025. The big news was, to use the company's own bullet point: "Disney to combine its Hulu + Live TV business with Fubo." To be fair, that is very big news and will instantly launch FuboTV into the big leagues in the streaming industry.

But there's more to this story than meets the eye.

The positive details of the FuboTV/Hulu deal

The big number in the Fubo/Hulu deal is that FuboTV will see its U.S. customer base expand from around 1.67 million to over 6.2 million. That suggests FuboTV will see a huge step change in its revenues. The company lost money in 2024, and it isn't clear that Hulu will be the key to turning a profit, but the new customers are a big win.

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Streaming, like cable, is a bit of a numbers game. A company has to pay for content, and then it sells that content to subscribers. And advertisers pay money to have access to those subscribers. The more subscribers FuboTV has, the more its costs can be spread around. And the more subscribers FuboTV has, the more attractive it will be to advertisers. No question, merging FuboTV with Hulu will benefit FuboTV.

Another notable issue is that litigation between FuboTV and Disney (DIS 1.42%) has been, by mutual agreement, shut down. The tension was over live streaming of sports. A few days after the FuboTV deal was announced, Disney announced it was no longer going to build its planned sports streaming service. That's another win for FuboTV.

FuboTV will also get a $220 million cash infusion from Disney, FOX (FOX 2.25%), and Warner Bros. Discovery (WBD 0.18%). All three of these companies were working together on a sports streaming service that was later canceled. This cash boost will be a welcome addition to Fubo's balance sheet, given the red ink on their bottom line.

Potential problems for FuboTV investors from the Hulu deal

There are clearly some big wins for FuboTV in this transaction. But investors have to ask themselves what Disney is getting out of all of this. For starters, it gets to exit Hulu, which was a bit of a complication for the company given its own streaming aspirations and the content relationships that Hulu has with Disney competitors.

While that arguably simplifies Disney's streaming model, there's more to the story here. That's because Disney will become the majority shareholder of FuboTV with a 70% stake in the company. Disney will also become a lender to FuboTV, which will receive a $145 million term loan from Disney as part of the transaction. These two facts are potential game-changers and should create big problems for anyone who takes a glass-half-empty view of the world.

From a fundamental perspective, a company is owned by its shareholders. The purpose of most companies is to do what is best for its shareholders. FuboTV's most important shareholder will be Disney after this transaction closes. Given Disney's 70% ownership position, FuboTV's goal won't be to do what is best for individual shareholders. The goal will be to do what is best for Disney. The other 30% of the company's shareholders are just coming along for the ride.

That alone might be enough to turn many investors off. But there's another step here that's important. FuboTV will likely end up paying Disney for the rights to air content produced by the Mouse-eared entertainment giant. Given Disney's stake in the company, Disney could charge lofty prices for its content -- so much so, perhaps, that FuboTV's earnings end up being negatively impacted. In fact, Disney could simply keep FuboTV operating at breakeven and still end up a big winner because of the content revenue it collects from FuboTV. Add in the debt that FuboTV will take on as part of the deal, and Disney's control will be even stronger.

This may be a cynical view, but investors should consider it

Clearly, there is no way to know how the FuboTV/Hulu merger will play out. It could be a master stroke for FuboTV as it looks to build scale up and become sustainably profitable. But incentives matter, and FuboTV is clearly going to be something of a vassal to Disney, which effectively owns it.

That could lead to business decisions that are in the best interest of Disney but not, perhaps, in the best interest of other shareholders. Even if you have a glass half full view of this deal, you should keep your eyes on the empty half of the glass, just in case.