All right, we'll get started. Hey, everyone, I'm Nikhil Aluru, help cover telecom, cable, satellite here at J.P. Morgan. Joined by David Gandler, CEO of Fubo. David, thanks for joining us.
Thank you for having me.
Of course. So I think, I mean, just to get started, you know, you and your team have done a lot of, a lot of changes over the last few years operationally, you know, to the product, as well as moving through a lot of financial, milestones. So maybe just to begin, you know, where are you spending most of your time today a nd, you know, what are the major kind of items that you wanna highlight for investors for the remainder of this year?
Is that a trick question?
No.
Well, unfortunately, I've been spending more time than I would like in Washington. But I think for the most part, you know, we have so much access to data, and it's a very transparent business. S o, you know, I attempt to sort of move around into different areas where I think I can add value. Legal, obviously, is one at the moment. But generally speaking, it's around product innovation, technology, and that includes advertising.
Great. I think that's a good segue, I guess. You mentioned legal. I guess, first off, is there anything you can share, any update on status of your lawsuit against the JV, you know, now named Venu Sports?
Yes. I think, I think the name is great. Almost looks like Fubo, too, when you look at the logo. But no, I think, from a legal perspective, you know, we alleged in our complaint that they have been engaged in anti-competitive behavior, you know, with the ultimate aim of monopolizing the market and, you know, suppressing competition, depriving consumers of choice, affordability, innovation. Sounds like a rap sheet, actually, for Law & Order.
No, so, you know, I think that, you know, we're very happy with kinda where we are at the moment. The U.S. District Court has granted us limited discovery a nd, you know, we've received support from Capitol Hill, as well as a number of other pay-TV distributors, such as DISH and DIRECTV. You know, from my perspective, things are going as well as they can, and, you know, I think we've taken some calculated risks in the past that have paid off, and this may be one of them.
Great. So on the, you know, last call, you guys highlighted a few packages and tiers that you plan on expanding into, notably the free tier that you're gonna launch later this year. Can you talk a little bit about why you think the tiered strategy is kind of the best path forward for the company?
Yeah, well, you know, we've been very focused on building out a super aggregation strategy, and that strategy is very different from what other distributors are attempting to do. Again, just to be clear, everyone is focused on building an app store.
We're focused on really aggregating content, leveraging technology to drive discovery, and really being very user-centric, and dealing with issues around, you know, fragmentation, and friction in the user experience. O ne of the problems that we're dealing with is the fact that we have a very expensive product, best-in-class, in my view.
But all of those people that are coming in, they, as, you know, seasonally, they churn. S o the idea is, we've already, you know, paid the acquisition costs. Why not attempt to keep people within the ecosystem?
So if we can create a service that can dynamically keep people engaged during the off-season, that allows us to recirculate traffic, drive revenue, engagement, and also, obviously, create even more data than we have around our customer base, then, you know, why wouldn't we wanna do that? The free tier allows us to do that on two levels.
One, I think the focus will be on ensuring that we're retaining customers to some degree. Mitigating churn is one piece of that, and over time, you know, the goal would probably be to use that as an acquisition funnel as well.
I mean, so I guess with that free tier, you know, you've even mentioned the FAST channels that are growing in popularity. I think you mentioned 9% of viewership, this past quarter on FAST channels. Do you perceive any sort of down-tiering risk? I f so, like, how do you kinda delicately, you know, manage that fine line from avoiding that down-tiering from existing-
Yeah, so I think that, again, you have to think about Fubo as a sports-first cable TV replacement service, so you're not really down-tiering because you can only get sports in the virtual MVPD bundle. So this is really about augmentation of our product lineup, and just gives us a chance to engage the consumer in the off-season.
Great. Maybe moving to advertising, some encouraging advertising momentum recently. Can you talk about some of the product changes and innovations you've made on the tech front that's appealing to advertisers and, and helping drive momentum?
Yeah. I think we've recently announced several new ad formats, everything ranging from banner ads that have enhanced targeting capabilities. We've talked about interactive ads. T hen we have, you know, our marquee unit, which really is the on the homepage, which is sort of a take, a takeover, that's, you know, it's sort of our main, you know, I would say, key opportunity for, for marketers.
So, you know, we have—we've got several of those, and then we have some new capabilities that we're also working on. A lot of it is data-driven. S o, you know, our the, the goal for us is to really start utilizing a lot of the data that we have to drive CPMs higher.
I mean, recently, you know, the industry's seen a lot of expanding digital kind of ad supply as you see more AVOD, you know, SVOD services add on advertising inventory. How has that changed the competitive dynamic for you in ad sales? Y ou know, you mentioned the CPMs. You know, have you seen... You know, how are those trending after we've seen kind of the increase in digital ad supply?
Yeah. So, I think there's a few pieces to this. One is. You know, we've always said is that entertainment content is fungible. So I think on the advertising side, it's probably very similar. But given the fact that we're a sports-first platform, you know, we're still gonna continue to see, you know, increasing interest, in our inventory, and thus, higher CPMs. But certainly there's a flood of inventory coming into the market that has, you know, depressed, CPMs in other categories, I would say, the non, sports categories.
How have we seen all this supply, you know, from a high level, looking at the linear advertising space versus digital? You know, you're in a bit of a unique position in that you offer digital ad space, but, you know, there's still a lot of linear distribution in the way that, you know, your content is presented.
How have we seen, you know, what the SVOD services and what the AVOD services are doing? How is that driving a shift of ad dollars from linear to digital in your view, and what kind of tailwinds does this have for the broader ecosystem?
Yeah, I mean, nothing has changed, right, since we've gone public. There's, you know, two components. There's the pay television is in secular decline, so it's driving people into streaming, so more eyeballs within the streaming space, and at the same time, you're seeing a shift from television advertising to streaming. So, you know, b oth of those obviously help create the tailwind, and that tailwind, I think, will persist over the next few years.
How do you balance that with, you know, a lot of exclusive sports content on these DTC services as well? You know, you mentioned kind of, you know, you benefit from having the advertising premium of sports. We're seeing more and more sports go exclusive to DTC, you know, for example, the NFL, NFL game on Peacock, you know, Thursday Night Football on Amazon.
You know, we're seeing Netflix, Christmas headlines, and then, you know, whatever happens with the NBA rights. How do you perceive what that could be to your business, and how do you have to manage through that risk over the next few years?
Yeah, I think that I remember when Amazon had acquired Thursday Night Football, and everyone said, "Oh, that's it. You guys are dead." T hen, I think I heard the same thing about Sunday Ticket: "You guys are dead." It's the same thing over and over, and nothing really changes.
These are all one-off games. People need to watch the whole season. We're very focused on local sports, and we have all the local NFL games, and so, as we've stated many times, those deals are going into the 2030s. So we feel pretty good about the current packaging that we have a nd, you know, obviously, for marketing reasons, the NFL, you know, should be looking to expand platforms that are interested in carrying its programming.
I mean, to that vein, you know, there's a lot of unique functionality that you have on your service to, you know, draw, like, higher engagement from users. You know, you've talked about the MultiView and other investments you've made. What do you hear from advertisers about your tech stack or your platform that is attractive to them, that you wanna highlight to investors?
Yeah, well, I think, very recently, there was a report that came out from TVision, that highlighted, just viewer presence and attention. I think there are two key metrics that stood out to me or data points. One was that I think we over-index, like, I think it was, like, 35% above just the average virtual MVPD, and then somewhere around, like, 25-ish% just over CTV in general.
So, you know, people like the platform. Users are very engaged, and advertisers are certainly have become increasingly interested in, in the platform. In fact, we've been recently invited to several key agency upfront events. So, we're super excited. We're gonna continue to work with advertisers. We'll, we'll look to ensure that we're very focused on their needs.
Y ou know, we've been- even in the ad side, we've been first to implement lots of features, such as Unified ID 2.0 a nd we've been first to implement some of the data capabilities, first to implement dynamic ad insertion in linear. So, you know, we'll continue to remain in the forefront of that.
Can you help us think about what your, you know, advertising CPM spread may be to some of your peers today, whether on the vMVPD side or maybe even on the cable bundle or what we're seeing from the SVOD services now?
Yeah. So I mean, I think we're all hearing that the broadcast CPMs are coming in significantly. You know, from our perspective, I think that, as I said, sports commands higher CPMs. You know, and when you look at an audience like Fubo's, we have... It's the most expensive product in the market.
So you have high discretionary income, focus on male, sorry, adults, 25-54. So, you know, we're still seeing sort of, I would say, low- to mid-20s across the board, but clearly, you know, mid- to high 30s on average for sports programming.
Great.
That's also outside of the NFL, which is interesting.
Oh, interesting. I guess before moving away from advertising, we're still a little early in the year, but anything you can share on what you're seeing from political trends, any expectations for what political contribution could look like for you this year?
Yeah, look, it's still a little bit early. I'm sure we all anticipate the last three weeks before the election are gonna be the most impactful from a revenue perspective. What I like about our position is that elections are won and lost by hundreds of votes. So, you know, there's no way you can buy around us when we have, let's say, 10,000 or 20,000 people in a specific zip code. You know, I think that we'll benefit from higher CPMs as it relates to that timeframe.
Great. Perfect. Maybe if we could turn to thinking about the content side of the business and just your programming slate. You know, there's been a lot of changes over the last year with early last year, you had trimmed the AMC channels, you added RSNs, and then most recently, with the announcement of the Discovery channels going away. To the extent you can, can you talk about the strategic rationale behind each of those decisions, and maybe how you saw customer behavior or reception change?
Yeah, well, you know, a lot of these decisions are made years in advance. I mean, you know, we track our users on a daily basis, and we're constantly reviewing our programming slates. I think Discovery is a slightly different scenario. You know, we saw the same press release everyone else saw. We said, "Oh, you guys are going to launch a JV." Came up with that decision pretty quickly.
We submitted a proposal to them, asking them for the same terms that they were going to offer the JV. In return, they said it was too complicated for them to put together an offer, but they were kind enough to extend to us an extension of the current arrangement, which were, again, exorbitant rates and onerous terms that they wanted to impose.
You know, I would say, in line with the previous agreement, and they offered this extension just beyond, I think it was September 15th, so just beyond the launch of their new sports platform. So, that decision was pretty clear to us, where we can't afford to take on content like that going forward. We have a goal to reach profitability in 2025. That is our plan.
A t the same time, because we do a good job of really sort of managing all of our data, you know, we have seen the FAST channels kind of step in for some of the Discovery programming to alleviate some of the losses of the channels. Y ou know, I would say that at least in the first few weeks, the impact is not, let's just say, it's, it's not as great as we had anticipated, so, it's more favorable-
Okay.
at least in the early weeks.
Great. So, you know, it sounds like the Discovery channel decision was pretty quick after the announcement of the JV. You know, we estimate that, you know, the content slate rationalization has been pretty margin accretive. As we think about that 2025 profitability target, to what extent, you know, would you consider the removal of the Discovery channels additive to that, or was that contemplated in the guidance?
Well, it was contemplated in the guidance, because, as you know, I think we lost the content on April 30th, and earnings was on the 3rd. Yeah, I mean, l ook, it's- we do this every day. We're the only paid TV platform in history to grow double digits, dropping content, AMC, Turner, TBS, Discovery, Scripps. So it's a unique situation for us, which really speaks to the quality of execution at Fubo.
As we look outward and think about your algorithm, kind of getting to, you know, profitability in 2025, when you look at the programming slate today, is there more room for opportunity for, you know, rationalization like this? How do you think about what's remaining? You know, can you keep pulling on content as a lever to get to profitability?
We have to, right? You know, we're, like I said, we analyze this stuff almost every day, and we're constantly running different scenarios a nd we're, you know, and if we remove content, that doesn't mean it doesn't come back.
If you think back to 2021-ish, you know, we dropped Sinclair, and we dropped the RSNs, and everyone else ended up dropping the RSNs, and then we brought them back. So, you know, I would say that it's a very fluid situation, and I think as content owners rationalize their business models, they'll start to understand the importance of really mass distributing content for maximum monetization.
I mean, so to that extent, you know, you talked about there's more opportunity, more room for opportunity in the content slate. You know, what kind of tools and, you know, analytics are you thinking about when you're balancing, you know, what you know people use on your service, and if they're not using channels, you know, you could drop them, but also having to balance that when you look at your peer group a nd thinking about, you know, do you want to offer a channel that either your peers don't have or, you know-
Yeah
... the risk that if you cut something that they do have, you know, how do you think about that?
Well, I think I mean, the risk of dropping a Turner or TBS in 21 is quite great. But we've... Again, I think we're leaders, not followers. Almost everyone follows what we do, including naming features, cool names like MultiView. But yeah, I think, you know, look, we're, as I said, we're constantly reviewing our program slate, and we look to differentiate, particularly around local sports.
It's an area where I think we've differentiated ourselves a nd, you know, even in the FAST side, I think we have, like, 25 or 30 sports channels, that we use to sort of, really create the sports cohort, really to drive advertising revenue there.
You know, you mentioned a lot of the local sports. You know, as you think about some of these sports rights packages that are going more digital over time, what do you think happens to the local sports business? You know, do you expect any one of, you know, the streamers to pick up a local package, or do you think it's always gonna be in some sort of linear kind of distribution?
I mean, it's tough to say. I do anticipate that, more distribution is better. I think our view is slightly different. As I mentioned earlier, we're in the business of aggregating content, aggregating sports. So, you know, just having a D2C platform offer some portion of the content is just not enough. People prefer to see, you know, everything in one place a nd Spotify's done a good job of that in audio, and I think we'd like to do the same thing in video.
Anything you can share on viewership metrics for those local sports relative to some of the more national stuff you have?
I mean, I would say, generally speaking, we're seeing strength. I mean, I think the month of May, so far, in terms of, like, when I look at health metrics or vitals, engagement is exactly where we'd like it to be.
This is one of our best months ever, in terms of engagement. You know, it's very important to have a healthy mix of content. S o, you know, we're trying to remove some of the seasonality in the business tied to, obviously, the fall sports calendar. But yeah, no, I think, you know, things are going as well as they can, given the situation.
Great. So in addition to actually rationalizing the content slate and removing channels you've talked about before, another lever to pull for profitability is to, you know, generate better rates when you renew and you have those renewal schedules. How do we think about the breakpoints you need in scale to show up to a negotiation and be able to either drive rates lower or maybe slow the pace? How do you think about the sub growth you need to do that?
I mean, you know, look, I think we have stated in the past that roughly around, you know, 2 million subs is a good number. But, you know, given the JV, things change. You know, I think as we've stated, or we've, I should say we've alleged, that you know, that the defendants are engaging in anti-competitive behavior.
B ut as much as that may create irreparable harm, I think on the other side, you know, we don't really talk about the positive piece to this a nd with some conditioning or some conditions placed upon that JV. I mean, let's not forget, we spend about $1.2 billion in content, of which 90%-92% of that, maybe a little bit more, is that subscriber-related line of our operating expenses, $1.2 billion. So you improve that, you know, by, and you know, 5%, 6%, 10%, and you've got a business that's not in bad shape.
Where are we today with your, your affiliate fee per subscriber versus your peers or versus the average industry?
Yeah. Well, we don't talk about that often, but we have stated with respect to the lawsuit that, you know, we're paying roughly 30%-50% above market a nd that doesn't include the onerous terms that we have in the business, which include penetration rates.
Y ou'll see, if you look at packaging from, like, Comcast or Charter, you'll see that they have multiple packages with fewer channels, and that's not an option that we get. But, you know, again, as that changes, I think you can see some significant upside in the financials of the business.
Great. So, I mean, talking about some of the pricing and packaging, you know, you've mentioned a few times today that you do have one of the more premium priced products in the industry a nd your product, the pricing of your product, has evolved over time, as has peers.
Right.
As you think about your overall value proposition, how do you think that spread of your pricing versus peers should trend over time?
Well, at the moment, we're probably about between $5 and $10 above, you know, our, our competitor pricing. You know, I think the key here is that pricing is relative. Everybody's pricing is moving higher. Just the cost to run a business like this, becomes more expensive. Sports rights are more expensive.
So I think relative to cable, we're still priced, efficiently, effectively. You know, but again, we're obviously, constantly reviewing what that slate is and what the packaging, lineup could be. But at the moment, I think we're kind of where we wanna be. It's, it's a premium product, I mean, that's for sure.
As you think about where your gross adds are coming from, is the name of the game still showing customers that value prop versus cable and getting people who cut the cord and switch over to you o r at this point, are you going for people that don't even have a linear option, and so when the sports season comes around, you're able to just add them for, you know, "Hey, come on board?"
Yeah. Look, I think a lot more people know about the service, you know, and I would say in recent years. Look, the focus, of course, is gonna be on the cable subscriber, 'cause they have- t here's still 55 million households.
You know, if we continue to maintain our share, which is, call it, you know, 5%-10%, depending on the season, then, you know, we should fare, I would say, well. But we've always been focused on reaching customers that are not in the linear ecosystem also. So we've got, I would say, a good brand that is both in cable, and for those users that are not currently subscribed.
I mean, given... I mean, when I think about your direct peers, maybe like a YouTube TV or Hulu, with live TV that have a lot of marketing heft, especially around sports seasons, do you get the sense that there is pricing power in this business longer term, as those guys remain, you know, very much so, like, foot on the gas to get new customers o r do you think we need to see some sort of consolidation to reduce the com-
I mean, I don't know what kind of consolidation you can see. I'm not sure Google is in a position to buy anyone at the moment, and the defendants are certainly not in a position to talk about consolidation, further consolidation, today. So I think that, look, everyone is trying to rationalize their business, and you know, we personally have done very well.
I would say third quarter, just to give you an example, when YouTube has launched a significant marketing campaign with very aggressive promotional pricing, we were still able to add, if I'm not mistaken, about 300,000 net additions. I think and I think YouTube had added about 500,000 net additions at the time. So you know, I think that, again, we're very competitive from that perspective.
We have a solid product. We're very focused on product innovation, you know, building out our AI team since 2021, and focused on ensuring that people understand the value proposition of the product, right, which goes beyond what the content offers.
I mean, we think about YouTube TV and what they did with Sunday Ticket, and that seemed like a great customer acquisition tool for them. You know, are smaller sports rights packages something that you would consider, you know, bringing on an exclusive kind of rights package to your service?
Yeah, I mean, look, like I said, we're an aggregator. We don't really focus on exclusivity. You know, our job is to make sure that we have, you know, all the content that a sports fan or household is looking for, at different times of the year, and we'll continue to do that.
But we haven't. There hasn't been anything. I mean, we haven't seen any significant pressure by not having exclusive content. We actually built the business from the beginning, knowing we would never have exclusive content.
You know, how do you think about some of the timing around the price increases you've done? How do you think about how that lines up versus some of the exclusive content or some of the exclusive sports seasons that are out there? Do you think about the timing of price increases-
Yeah.
Around-
Well, we have to hit our numbers, right? So, the timing is the beginning of the year, because, you know, we wanna make sure we're continuing down, the path that we've set for ourselves in terms of achieving our goals in 2025. So you've seen, I think, two price ups now in the beginning of the year.
One was around $20, which is a huge price up, last year, which had a significant impact on adjusted EBITDA a nd, you know, this year, obviously, we're not gonna, you're not gonna continue to see, price ups, you know, and with those absolute dollars, but, yeah, we'll continue to price up, seasonally.
So as investors look forward to think about your 2025 targets, how should we think about the dynamic to getting to profitability between, you know, cutting costs and some of the cost optimization you've done versus raising the price point of the service from here?
Yeah, look, like I said, I mean, it's tough to see that, in the current landscape, but we have... I don't think there's an immediate company that can do, has done, or can do a better job than we have, managing costs. Let's not forget, we improved our, you know, EBITDA by about $100 million, on, like, I think it was $1 billion of revenue in 2022 for 2023.
We're gonna continue to focus on costs. Our revenue per employee is $2.6 million, which, as we stated, on our earnings call, I think, measures quite favorably to the industry, where a scaled player like Netflix does about $2.6 million. You know, we've reached $1 billion of revenue in seven years.
It took Roku 17 years to do that, and Netflix, 10 years. So, you know, we're very focused. We're gonna continue to stay focused on, you know, our cost optimization plans b ut at the same time, you know, we're, we're also focused on advertising technology to drive revenue, and our revenue is growing faster than our sub growth.
I think revenue grew in sort of the sort of mid-20s, while subscriber growth grew roughly around 18%, last year, last quarter. So, you know, I think we'll-- you'll probably see continued focus on cost optimization. You know, obviously, there are escalators in all these agreements, so we'll have to deal with that as well. And at the same time, we're looking to bring down and repackage some of our, our, our content. You know, the free tier should also help us drive revenue.
Great. Maybe thinking, you know, more higher level here, just thinking about strategic options. You know, the company has worked through smaller acquisitions in the past, like Molotov and-
Yep.
I think Edisn.ai, right? A lot of the, you know, initiatives you've had for advertising and marketing technology, of course, come from some of your acquisitions as well. When you look out at the, you know, landscape today, are there still smaller kind of attractive opportunities to scale, or do you think the company is large enough now to really develop the ad tech stack, kind of in-house?
Yeah, no, we don't really need to acquire any assets that are available. I will say, almost all assets in this sector are super cheap. I don't know how long that's gonna remain, but you know, I'm kind of surprised when I look around and say, "Wow, how cheap," including us, of course, but that's subjective.
Yeah, no, I think that, look, we're in a good position. We have a strong engineering team. We started to you know, release ad products. We're continuing to look at some other technological features around AI and you know, particularly within the DVR platform, we've released our AI playlist service, which I think is pretty cool.
Again, these are just sort of small things, and we'll start to focus on, you know, small language models to really improve discovery and focus on most of the data points that we have a nd that should ultimately drive engagement, which drives our revenue and helps us maintain our acquisition costs.
Great. I mean, zooming out here now, you know, as we think about what, you know, what is your strategic vision for the company longer term? You mentioned 2 million subs, we know what the 2025 targets are. You know, what is, you know, Fubo and FuboTV? What, you know, what is the kind of trajectory for you in your head in the longer term?
Yeah. So I think we're... I, I would say we're focused on really two things. One is the super aggregation strategy. In my view, it's very important. We wanna build on the 100+ hours that people are spending on the platform a nd, you know, that entails both attracting new customers as well as engaging current, I would say, customers that are coming in and out seasonally, on making sure we're attracting customers, you know, along the demand curve.
We want to... W e can't just have a, you know, a $100 product. We need to have a free product and then really build on products in between, so that we can dynamically move audiences throughout the year, customers throughout the year. A ll of that is really supported by a really strong technology platform.
When I say technology platform, it encompasses both consumer-facing features, back-end solutions, and obviously, our advertising tech stack. But those are kind of, I would say, the two key components of our strategic plan.
Great. Well, I think that's a great spot to leave it in. David, thanks for joining us.
Yep. Thank you.
Thanks so much.