Good afternoon, ladies and gentlemen, and welcome to the FuboTV Investor Conference Call. It is now my pleasure to turn the floor over to your host, Dan Salmon. Sir, the floor is yours.
Alright. Good afternoon, everyone, and a good Friday afternoon, which is always the best afternoon. Thanks for catching the tail end of your week with us, And we're going to dive in here shortly. We're going to talk a lot about streaming Connected TV and of course, the company run by our guest here, David Gambler, the CEO of FuboTV. David, why don't you just give us a thirty second background on you and the company and then we'll dive into some questions.
Sure. First of all, thank you for having me. I'm very excited to join you today. But before we start, I just want to remind you that during our discussion today, we will make forward looking statements concerning events and trends that may affect our industry or our company, and actual results may be materially different. So my name is David Gambler.
I'm the CEO of FuboTV. FuboTV is a sports first cable replacement product. What that essentially means is that we carry the live television cable lineup that a traditional, television platform such as Comcast or Charter would carry. We carry that over the top and it combines 20,000 to 25,000 VOD assets along with over 100 live channels and six ninety local broadcast television stations.
Fantastic. And I can see you're getting used to the public company routine by making
Yes. I've been told many times. Many times, please do not forget. I said, I promise. But I'm a data guy, so I like to provide data, and, you know, that's why it's important.
Good. Well, you just perked up the ears of most of the listeners on here because I love data too. So well, listen. I wanna I wanna get to the specifics of your business shortly, but I thought maybe we could start with a few high level questions and comments about the industry. Just for those who are a little bit more familiar with some of the related stocks in the space like a Roku or a WWE, let alone a Disney or a Netflix and and just stocks that have obviously been in the public market longer that that that this group might know a little bit better to help them ease into the Fubo story.
And I would say there's, you know, really two big topics that I've been asked about lately as far as it relates to your company and your space. The first is the growth of audience for streaming and connected TV platforms due to COVID, stay at home behavior, the loss of the box office, a host of other reasons. Maybe could we start there and your views on how audiences have shifted in the short term? And how much of this new viewership you think will stick even after sort of out of home life returns to normal?
Yeah. So, you know, it's I think it's apparent that, you know, people are spending a lot more time, you know, watching I I was gonna say television, but streaming services because it's, you know, it's you're you're spending home at you're spending time at home. Many of us are, you know, camp counselors this summer, you know, school teachers, you know, running errands and trying to sort of, you know, work in an environment that has completely, been unearthed. And so what we've seen, most recently, from our numbers is a surge in viewing. And what's interesting about Fubo's platform, as I said in my opening comments, we're a sports first, cable replacement product.
And we finished 02/2019, with roughly about a 125 of viewing per month, per account. And so with, you know, with sports sort of leaving the ecosystem, somewhere in first quarter, you know, and only about to sort of, start up again, it was interesting to see that people were actually spending more time on Fubo. So we have, you know, at least in the month of of April, seen a surge of roughly about a hundred and forty hours. So twenty hours of incremental viewing above the 2019, which really suggests how much more viewing is taking place for streaming services that are really focused on entertainment across the board. So, you know, it's a it's a huge shift for us specifically.
But for the marketplace, I don't think anyone could have imagined this level of engagement in the space. In terms of where I think the market shifts going forward, it's a tough question. What I'd like to see and what we'll be looking at very closely is whether we can maintain a much higher level of viewing across our entertainment networks as we've seen in our entertainment content more broadly. And then as sports returns, we would like to see sort of more accretive engagement, whereas it does you don't see it diminish in the amount of entertainment hours and news hours viewed. So that that's that's what we'd like to see.
I think I'm I'm hard pressed to believe that this is the new norm. You know, we are social, creatures at the core, and I just don't know anyone who doesn't wanna go outside and, you know, you know, go to a restaurant or spend some time with friends. And I think that, you know, it may you know, clearly, there'll be, some of that that will have shifted, and will be part of our new DNA. But, you know, it'll be interesting to see, how far or we're able to maintain, the current levels, which I I think, may not be possible. In our case, though, what's different is as a k you know, as a cable replacement service, you know, I like to triangulate against Nielsen numbers.
And so TV viewing, and Dan, keep me honest here, is in the three hundred hour range per household. And so, you know, my sense is that this the pandemic may have actually helped Fubo become more of a mainstream, you know, family product versus just come in and watch the sports, which which we've been trying to do over the last six to eight months anyway. So, we'll have to see how what the changes are. But with all the streaming going on, I think lots of people are talking to their neighbors, their friends. And I think while many consumers may not have switched or they I'm certainly sure that they're thinking about it.
And I suspect for the industry more broadly, q three is going to really be an eye opener for the group.
Yeah. Yeah. Hopeful you know, as you noted, you know, beginning to see, you know, some of the stay at home restrictions start to to move off. So, you know, it of course, the the the return of sports is sort of a can be a, bit of an inflection point in some of these viewership numbers. And this is all going to be a little tricky when you consider that the summer months are usually when TV viewership is at a lower level anyway.
But
Right.
Third quarter, and I think we'll start to see this, you know, what what what has stayed? What have that viewing what have that incremental viewing hours have started to stay and and stick permanently? So so the the second sort of big topic that that we get around streaming, and and and this is especially of late as there's been some headlines around HBO Max's launch and who they're partnered with for distribution or not, but but that's the the changing amount the changing among sort of content oriented players, say, like yourselves or a WWE or a Netflix or a Hulu, the apps, versus those that focus more on distribution, the distribution platform, so more of a Roku or an Amazon. Can you tell us take us behind the scenes here a little bit and talk about what the how does the dialogue stand between those types of players you know, in terms of how you share economics, the types of contractual models you use? And and maybe what you're seeing, you know, like I said, of broadly in this idea of what have always been the two big faction in media, which is basically content versus distribution.
Yeah. That is the eternal question. It has been and will continue to be. I think just stepping a little bit back from from where we are, I think, you know, for for your listeners, it's important to note that this is one very large Venn diagram. You've got distribution players that are also content players
Mhmm.
That are also apps, that are also technology companies. So you are going to have you know, you're gonna have to be dealing with these companies in in sort of in multiple areas. And so it's not very straightforward to say, here's the business model because, you know, there could be other services that, you know, you know, companies are buying from one another or delivering, to be able to make the economics work on a certain other area of the business. So for instance, you know, while we might want to pay an in app billing fee, to some of these platforms, we are also potentially a buyer of advertising. So that's just an example to to give your audience that, you know, there's give and take.
And so I don't know if there's any one way to look at this. It's not as as as clear cut as a here's my price list. Here are my services. What would you like to buy? There's no real menu for this.
So a lot of these deals are are are relatively complex and probably cover multiple areas across, you know, product lines in these deals. The other thing I'll say is that, you know, again, just to give your audience a sense of kind of how the the distribution, changes in terms of content and distribution, you know, you could argue that Roku and Fubo are both distributors. Right? We Mhmm. Have content.
We sell content. We provide consumers a way in which to engage with content. But what I always like to do is explain how we differentiate because that that's also a very interesting concept. You know, I would say that companies like Roku and, you know, Fire TV or Chromecast, those are are are distribution platforms that are closer to the screen. Yeah.
And they are aggregators of apps. Fubo is on the exact opposite side of the spectrum. Mhmm. And what we do is we're sitting right in front of the customer, and we aggregate content, and we collect consumer data. That is the sort of difference between the two.
And so in terms of relationship with these companies, you know, I think that the battle between content and distribution, I think, you know, it's it's it's something that has been going on for a very long time, and, you know, we always ask the question, is it content or is it distribution? You know, for us, as a smaller company that's just now hitting its, sort of, growth stage, you know, for us, it's important to ensure that there are a significant number of distributors. We recently announced our partnership with Microsoft and Xbox. You know, there's obviously other relationships that we're we're developing, in the meantime. But the more distributors out there, whether they're TV distributors like Samsung itself, which has its own platforms or Hisense for which Google has a sports partnership with, with TVs that they will be delivering to stores in the summer with those announcement made at CES recently.
And so having a number of distributors that are sort of connected device distributors as well as TV manufacturers, The more of these platforms that are available, the better for companies like Fubo to negotiate those deals. So that type of proliferation, particularly in The US, is very important. And then as we sort of scale our business internationally, you know, I think that there's more room for us to be more creative, in terms of ways to work. But the key is we're a software platform, and we are ubiquitous across all of these, devices, which gives us some some really good flexibility.
Excellent. And you're right. The, you know, the content distribution access is always a little bit oversimplified. There's always a there's always a group in the middle that, you know, do a little bit of Right? TV networks with in house studios, things like that.
The so it's a a fair point. One we have once again, lots of Venn diagrams that overlap and no clear cut lines all the time. So one more high level one for you. And, you you know, obviously, we you know, we core of your service is subscription fees, as you said, a cable TV replacement. But advertising is a emerging part of your business as well as a digital streaming service.
Right? Video is gonna be your focus and programmatic tools may be getting more relevant as well. So that that's another area we've, you know, heard about through the past couple of months of COVID where, you know, obviously, that increased viewership that we were talking about earlier has been a bit of a magnet for some ad dollars as well to, maybe help Connected TV ecosystem hold up a little bit better. But any high level observations on what you're seeing across the advertising trends in your ecosystem right now?
Yes. So first of all, just on Fubo, yes, we are a subscription business. I think it's important to note that for those of your those in the audience that have or are looking to acquire streaming portfolios, I think it's interesting because Fubo also adds sort of another element to the streaming space. Again, streaming broadly, not the SVOD, space, which because we don't we don't actually participate, in that space. But, what what's interesting is you have the Netflix model, which which you know is a subscription model.
You have the, Spotify model, which is either ads or no ads, meaning you have a freemium model where one can listen to music with advertising, and then upgrade their subscription to an ad free experience, which is a subscription based model. So it's sort of a almost like a either or. And then you have the third model, which is the Roku model where you get hooked in with this hardware device, and then they, you know, obviously, monetize via advertising. The fourth model, which is the one that we bring to the table, again, obviously, subjectively, I think I'm very bullish on, is a dual revenue stream. It is a subscription with advertising, and that really allows us to drive significant ARPU.
And so the ad component of our business is absolutely critical. You should think of it as, you know, how Roku's hardware devices, know, I I would assume is roughly around breakeven or low mid single digits from a margin perspective, and then all the money they actually begin to make is on the ad side. So we are very similar. We have a basic pack of channels at the very lowest level. And then the the obviously, there's attachments that we sell, both content and service attachments.
But then the ad part, it plays a very important role in our ability to continue to expand our margins. And so from an advertising perspective, you're right, the hours have obviously increased significantly during the pandemic. I'm not sure what we as a company did not We're not able to capitalize on that in April because as you know, I think many agencies and I think even there have been, you know, dozens of large advertisers that have were on CNBC saying we have to halt everything because we're not sure what's going on. And so I think there was a three week period in April, where we saw some, you know, significant deterioration, in in in advertising. Obviously, ad inventory opportunities were continuing to expand with really very limited fill.
That was a three week period. We saw some green shoots right before the NFL draft. And you know, May seems to have recovered very nicely for us. I just I don't know if advertisers are just interested in getting ahead
Mhmm.
Of when things start to open up and sort of wanna be first to market and be you know, take as much mindshare as they can for specific product groups. But we've seen a very nice impact from an ad perspective in May. In fact, what's interesting is those levels are, you know, have exceeded $5 per subscriber. So we're very comfortable with with the way things are going. And, you know, as sports comes back, you know, I believe we'll we'll we'll go back to seeing some premium CPMs heading into the third and fourth quarter.
So it should be from a digital perspective, from a connected TV perspective, more broadly, I think that, you know, it's it's gonna be very robust. What's also interesting is that we're also buyers of advertising, as you know. And I I you know, we're seeing some significant opportunities on the traditional TV side, which, you know, we're typically we we don't buy TV. We're we're a company that, you know, over the last few years has specifically advertised through digital channels, you know, in real time, in fact, and manages our acquisition costs, very tightly. And we've seen some major opportunities in advertising on the traditional side, both because there's lots of inventory available and also we've taken, you know, taken advantage of decreasing rates.
So I think there, when you talk about customer shifts, about viewing and streaming, I think those are moving towards the sort of connected TV direction in terms of hours viewed. I mean, again, people will will have to start commuting to work, that that should impact the number of hours. Mhmm. But on the business to business side, the advertising side, I think you are seeing a structural shift. And if you think about it, it makes sense.
Companies like Fubo, we collect 21,000,000,000 data points a month, and growing. And so there's proprietary data that we have. Obviously, we don't know who the the individual is by name, but we can match up, you know, IDs of phones matched to connected devices and sort of we can build cohorts of people, for specific, ad campaigns. So you have the proprietary data. You have the premium CPMs associated with connected devices, and then you also have the addressability.
So that to me is a very solid, recipe for advertisers starting to, move dollars. Not starting to. I mean, this has been happening, very slowly over time. But I think given the, you know, the, the the cancellation of the upfront for many of these advertisers, think I it's gonna prove to be a very opportunistic, situation for a lot of the connected TV, players. But I but we should be very specific that it's the premium inventory that's going to, garner the most value out of this.
Because as you know, you know, when you watch an ad on a, you know, tier three or tier four website, you don't typically remember, the ad that you saw associated with that content. And then I think with sports in particular and premium content, you know, that brand value, I think, is is quite important.
Yeah. No. It's a good point. That's a fair point. And I I always appreciate when companies that sell advertising are willing to turn around and share insights into the money they spend on advertising as well because you've gotta market your own products.
And I've got to imagine a few of your programming partners are happy to hear that you've been dallying on their linear networks
lately before. So We'll start nibbling a little bit more.
Never hurts. So so, you know, maybe I wanna come back to some of the so let let's just sort of continue to drive through here maybe a little bit on on some of the things on on the business and maybe now just moving to the sort of vMVPD model, the skinny bundle model, as you say, a cable replacement product. Tell us about your thoughts a little bit on the competitive set that you see here. We've had some players like Sony exit the market. We've had some players like Hulu and YouTube sort of continue to push through and see relatively, you know, solid growth.
And then we have some, you know, some players, some digital products from from, you know, traditional satellite companies, have, run into a little bit more challenges from a subscriber growth perspective lately. When you turn and look around at your most direct competitive set, what do you think some of the most important trends going back and forth are as they relate to your company?
Yeah. Very good question. So, you know, I I do get a lot of questions around, you know, how can you compete with Netflix or or some of these other groups? It it's it's it's an important question because we don't compete with them at all, actually. We are a sports first cable replacement product.
We are branded as a sports platform, and I think that is our point of differentiation. We carry, content. About 30% of our content, sports content is not available anywhere else. And so, you know, when I look at our competitive set, it's on it. It's we're actually competing with Charter and and, you know, Comcast and the satellite guys, you know, and the telcos.
But if you were to say, you know, where would you where do you compete in your digital space? I would say that, you know, probably the only two competitors are would be the YouTube TV and Hulu. That's it. You know? And there there's many reasons for that.
One is, you know, no other services carry nearly as much programming around sports programming as they do. So those are sort of the closest. Obviously, you know, we we carry more. And so but at the end of the day, we're trying to fight for, you know, the 84,000,000 customers in the, in the traditional ecosystem.
Mhmm.
The people that are paying, you know, 110 to, you know, a 175, in some cases, more money. It's the people that have two, three, four set top boxes that are paying $8 per set top box before they even get started buying any content. Mhmm. And then I think if you think about, you know, the competitive set for us, it's really around sports. We do not compete with SVODs.
In fact, you know, we carry, you know, content from all of the sort of major media companies, almost all the major media companies today. And my sense is that with the hours viewed, which I mentioned before, exceeding a hundred and forty hours, you know, most recently. My sense is that if you look very closely at SVOD viewing, it's going to be sub fifty hours. And, you know, clearly, Netflix being the largest player, I have to believe that the cost of content will continue to grow just given the level of competition in that space with Prime and Hulu and, you know, Netflix and Apple TV now or Apple TV plus. And then you have your media companies that are also buying for that type of content.
My sense is that, ultimately, we'll we're going we're gonna come full circle back to the pay TV ecosystem. Mhmm. Because it is actually relatively efficient if you think about it. And I I have made a comment before that at the end of or within first quarter, you know, the average cost per hour of viewing was roughly about $40.42 cents. And prior to our call, I just, you know, took a quick look and just back of the envelope math.
I'm now feeling comfortable that we're closer to 38¢ during the pandemic. Now we'll we'll find out shortly if that's just pandemic related, and then we go down to to, levels closer to the 42¢. But if you think about that, you know, my rough estimates have, Netflix pegged at about 20¢ per content, hour. So, you know, that to me says that despite the variation in price, you know, $13 in The US domestically versus, you know, Fubo's base package price, which is $54.99, we are providing a significant amount of value. Mhmm.
And if you you just look back in history, you know, whether it's, you know, fifteen years ago or twenty years ago, I think cable was was offering you know, I think the price per viewing hour was closer to something like $6.06 or 7¢, which if you think about it was that's why you had an explosion of people wanting cable. Right? It's it was cheap. It was a lot. It was premium.
And so I think what will probably happen SVOD versus these live sort of virtual MVPDs, which we play in, is that the cost per hour will continue to decline. And the cost per hour on the entertainment platforms or any niche service, I think a niche could be big because we have know, obviously, lots of people have multiple services. It's not a zero sum game. I think what'll happen is you'll start getting closer to the 30¢ per hour or more on the SVOD services while the virtual MVPDs continue to climb. So I I think that, ultimately, we're gonna be back to the bigger bundle, not the skinnier bundle, which may, you know, I think may be a reflection of what you were saying earlier, how some have experienced some difficulties, in continuing to maintain, specific, growth levels.
But that's probably because you'll see that content owners will have to continue to increase rates. Right now, they only do that at the wholesale level. But as they move further into the direct to consumer space, they will have to do that. And that's gonna be very tough to do because you're completely exposed. Right?
People know exactly what content you have. And, also, customers will start feeling more comfortable moving in and out of these services. Mhmm. So there's a there's a there's we're very early in the s curve. We're at the bottom of a product cycle.
Again, we've been this is sort of something that's been happening over the last four or five years. But, again, I I feel like people are still trying to understand what is it that I want. And there's lots of folks that are sitting on the sidelines that have cut cable, you know, during this pandemic. I think one of the things you mentioned to me, you know, offline was, you know, where where did what happened to these people? They dropped off.
Mhmm.
The reality is I this is why I'm saying third quarter, I think, is gonna be an interesting quarter is those people dropped off because there's no sports. You can get entertainment almost anywhere. And so it'll be interesting to see what happens in third quarter as sports comes back. And, typically, you know, people start to, you know, look at cable packages and streaming packages in the fall. So it'll be that that's kinda where we'll really see what the what, you know, the the impact of COVID on streaming, at least on the virtual MVPD side.
Yep.
Let's stick with the the sports team, but maybe switch over a little bit on to the to the programming side. And as as you noted, you guys have have more store more sport more sports than than others. At the same time, you've made some you've had to make some selections about not having it all, and maybe we'll come back to how pricing plays into this. Mean, I'd really like to ask about of two bundles of products. One is, I think what's fair to say is the longtime 800 pound gorilla in cable sports, ESPN and Disney.
Yeah. And second, one that's a a set of businesses that have that have moved ownership lately, the what we still call the Fox Regional Sports Networks, but now Right. Under the ownership of Sinclair. You know, I I don't mean to dial in too much on what on the ones that you've either not included or removed lately, but I'd love to hear a little bit about those dynamics or And how you think about then secondly, sports networks have traditionally, you you know, putting aside the broad we've had the broadcast networks where most major playoffs and and and and major national, you know, once a week games type of things tend to show up there. National sports networks carry a load of sort of featured games as well.
And then you've had the regional sports networks that sort of scoop up the rest of that sort of baseball, hockey, NBA type content. I would love to hear sort of your sort of more broader thoughts on each of those models and how those different types of programming partners play into your thinking with your business.
Sure. So let me I'll start on Disney then first. I don't think anyone would deny it's an amazing company, an amazing content lineup. We have been in touch with Disney for since we've launched the platform in 02/2017, specifically the virtual NPD platform. We were a soccer service before then, which launched in 02/2015.
But, yeah, it's great content. We're in touch with them all the time. But as I've said many times, you know, there are we are very disciplined as a company. You can see that just through, and you'll see that shortly as we continue to to file, you know, our our our our queues, and start doing some some of these calls more broadly. Again, very disciplined company.
So we have, been of the view that we need to grow first and then do deals as we grow because, you know, these are very expensive deals. As you can imagine, it's very easy to be underwater, which I'm sure you know from just some of the research you've done on on on other publicly traded companies. We've
run a few Excel analyses on it. Yeah.
Yeah. I'm sure. I'm sure. Look. I I'm very excited to say that we, at least in 02/2020, are are not gross margin negative.
That is a very important point that I'd like to make. There's I mean, I've heard myself many people say that these things are so far underwater that they'll never recover. Again, I I can I can only speak for what we do? It is a very challenging business, but if you can figure it out, you know, it's it's it's it's a very it's a very solid business. It's a business that has many levers to pull and a lot of optionality, as I mentioned to you, you know, in terms of advertising, subscription revenue, and attachment rates, and things like that.
But on the content side, you know, we as I said, we collect 21,000,000,000 data points. We've done a great job growing, and growth obviously is is has not been the key. We've been really focused on doing the right things, setting up the foundation for the company for its growth stage, which now, as I said, we're gonna since we're margin positive, that's something we'll be focused on going forward. And so, you know, as for the content partners, we're constantly optimizing. That that that, you know, refers to all content partners.
We we you know, we've gone through one renewal cycle already, which we're very happy with. Our partners have seemed to be very happy, with our renewals, as well. And, you know, it's we're gonna we're gonna you're gonna see a lot more of this. I think unlike cable where you gotta have everything, you know, I'm of the view that you only need about 70% of the gross rating points. There isn't anybody out there, any consumer out there that watches every network or every broadcast network.
And so one of the beautiful things about streaming is that you once you find your customer base, your demographic, you start to hone in on that group. And, you know, we would love to have every piece of content, but it's, you know, clearly not realistic or else we'd be at the $120 or $110 price point.
Mhmm.
So it's something that's going to continue to be optimized over the next twenty four to thirty six months. And I think that what you could see in the virtual MVPD space, which is the live linear pay TV bundles, is that as they continue, I mean, at the ones that are performing best are the ones that have the greatest breadth of content. And I think over time, there could be additional business opportunities, business models where, you know, maybe we're charging for data or some other type of relationships. Again, I'm talking about fast forward maybe two, three, four, five years from now. You know?
And there there might be some mutually interesting opportunities as we work together. So, again, this is a work in progress. You know, there's no hard feelings on either side. I mean, business is business. And, we're looking to build a company over the next ten to twelve years to be a leading player in the space.
So making mistakes early, as you mentioned around Sony, could be very dangerous. And so, we're we're taking a disciplined approach, but I can assure you we're we're speaking with every, media company and content partner out there, regularly. And so, you know, you as as as things, progress, you know, there'll be partners that come in, partners that come out, as you've recently seen. And, you know, obviously, that's monitored, you know, very closely, you know, on a on a monthly basis.
And yeah. So I I think that, you know, some of the the things you've highlighted here is, you know, the for better, for worse, the flexibility of the product means the the the programming lineup is gonna be more flexible than than what we've what we've seen from traditional packages where it is a little bit more one size fits all and not that we of course, have blackouts happen and things like that and drops do happen, but there isn't a lot of differentiation in terms of the product lineup. And think you're you're saying that that that's important, and and even your own product may may change, you know, back and forth as a result of that. You you know, you have
some options. It's optimizations. Just like a b testing. You you test and by the way, it keeps everybody honest. This is about customers first, consumers first.
And, you know, with big bundles, everyone has to have everything. When you if you're if you're sitting in a, you know, Altice household in New York and you wanted to switch to Fios, the first thing that does that doesn't come to mind is I wonder if they have this channel because, you know, everybody has the same exact channel lineup. In in this in this sort of virtual MVPD space, somebody may have a broadcaster, somebody may not. Somebody may have an RSN, Somebody may not. So you know?
Or some networks are available and some are not. So there's some work that has to be done. And so that's why I keep saying it's important to note that these things are we're so early in the game, and we're still continuing to optimize. But at the same time, this is the best thing for the consumer because it forces companies because remember, these deals are three years. They're not for two or three years.
No one's doing ten year deals anymore. Mhmm. No distributor or and no content partner wants to do a deal that long. And so with that, everyone is forced to, a, build a better product, right, because that's how you lure consumers in. And on the media side, if you wanna be part of a bundle, you're gonna have to provide high quality content.
If you if you don't, you can't just hide like you you hid in the 200 plus channel lineups. You're gonna have to deliver value because, you know, it's it's it's a market that is is quite tight, and the data is available in real time. And you also have your own products out there, so we know how to price them. So all of these things are actually much, much better for the consumer.
You mentioned how much you're focused in on your audience and the use of data and crunching those numbers to figure out what's optimal for them. As I mentioned before, I mean, you've got some national cable networks, sports that maybe not in regional ones that maybe not in broadcast. As you look across those three models, are there did the model stick out to you? Do you say, you know, you know what? We really got to have, you know, the the the championship stuff.
We got to have the broadcast guys or, you know what? That's too expensive. The value isn't there. You know, maybe I need a broader sports style of network. I need a national network where I've got a lot of
premier stuff
and and maybe not the the regional things. Are there any broad observations that you have across the offering of those sort of three styles of programming partners?
Yeah. So, you know, our strategy is very straightforward. Come for the sports. Stay for the entertainment. Mhmm.
You know, ideally, sports drives lower acquisition cost. And then if the product is solid and the machine learning recommendations that we build continue to work as they are, you know, we'll start to drive better retention because people are spending more time on the platform. That's just sort of a very straightforward dumbed down version of of what we do. But it makes sense, and and it has worked. As it relates to the content partners, again, we are monitoring this on a monthly basis year over year, day over day.
I mean, all of these things are looked at. And, you know, as I said, we're at the bottom of an s curve. So the first thing that happens at the bottom of an s curve is that it's a it's a price game. Who is cheaper? Who do I you know, who's giving the free giveaways?
That's who you wanna go test first. But once the pricing game, is sort of we've through that stage, The next level is gonna be about the 65 or 70,000,000 people that still have traditional cable that can afford it. Right? They can afford a 110 or a $120, and it's gonna come down to experience. So first level is price.
Second level is experience as you sort of start to the the market starts to mature. So, you know, from that perspective, you know, I'm I'm worried about price today. I'm not I might not be as price sensitive tomorrow because sports commands a premium in general. You know, whether you go to a hockey game in New York City or you buy a jersey, you know, that costs several $100. So sports fans are willing to pay.
Mhmm. Right? That's what they do. They have they're passionate fans, and they have a a high propensity to consume, at very expensive prices. So I'm less about price, more more about optimization.
Everything we've done to date is to prepare the company for sustainable and healthy growth. And so, you know, if something doesn't make sense, we're not we're not gonna do it. Because if you notice, Fubo versus the competitors, we have not given away anything more than a seven day free trial. We we don't have any promotional pricing on the front end because we're already feel that we're giving you significant value coming from a $120 or a $110 to $54.99, and you're not paying for, you know, set top boxes, equipment. We're giving you 4 k for free, which is not cheap, which we're the only ones in the market to do that.
So, you know, again, this is a this is we're very early days, and, there the the dynamics are quickly changing. And we're just you know, we're trying to be you know, I don't wanna say reactive, but we're we're trying to be proactive in a very reactive way because we're we're following the trends that closely.
You get the data every day. Right? I I think that that's what you keep coming back to is, you know, we don't we don't need to sit and guess here. We can see it every day.
No guessing.
And notwithstanding that you're, you know, a national product and and maybe those national footprints, some of those national Well, that's what helps. Right. That that helps. But from the sounds of it, what you're saying is is if, you know, if if you were seeing, you know I'll just pick a city. I'll pick my my my my my usual city, New York City.
That if you were seeing
Yep.
The product get big traction in New York City, you know, you might look at those regional sports networks that service that market a little bit differently.
Yeah. No. For sure. Look. I mean, you you know this.
We carry AT and T Southwest. We carry Nessen. We carry MSG. You know, we're carrying networks, and we're carrying the Comcast Ness. We we would we would like to do deals.
And, you know, just, again, interesting on my end, you know, if we if we were if we forced ourselves to do a deal on 12/31, I and you may say we may have looked silly because of the YouTube deal, which they got to cherry pick networks. Right? I'm sure you read that, that they had they were able to pick the networks that they wanted. Mhmm. Out of the full suite of networks.
I actually, in your city, in New York, which is also my city, I don't believe, again, correct me if I'm wrong, that YouTube TV had taken YES Network.
They had them, they lost them. And and that's why I was using your product more at that stage.
Right. Well, so so that's my point. So this so things are changing, and, you know, I I don't think you would have anyone could have thought that, you know, two years ago that you could have bought some some RSNs and not others. Yeah. So, you know, that's why you have to be very careful right now in in doing deals.
And the thing for consumers, which is great, is there's no blackouts. You actually just cancel and go on, and you can you know? And so, again, this is all about preparing for what is the next, you know, five to ten years look like, and that's what we've been doing over the last twenty four months.
You mentioned earlier potential other revenue streams. One that we get asked about a fair amount is sports betting. Obviously, various media companies starting to dangle their feet into these waters a little bit more as we see legalization What's What's your take on it? Is that an important opportunity for you, something you want to just stay away from maybe? Obviously, when you're leading sports first, I got to think it's intriguing to you, but I would love to hear your views on the state of sports gambling and the opportunity there.
Yeah. Well, that that's a great observation. You know, being in sports space makes it difficult for you to look away. I think that the again, the reason why I'm so excited about what we do is because we're sitting at the epicenter of three major secular tailwinds. The first is subscription.
You know, as we said, you know this, that the traditional cable companies continue to lose subscribers. Folks are moving to the streaming space, so that's one trend. The second trend is the advertising trend, which I think is a really powerful trend of advertisers moving from television to connected TV for the addressability and their ability to build attribution models and more effectively spend their dollars. And then the third trend, I think where we sit very nicely, is on the wagering side. Because at the end of the day, we have 35,000 sports programs, video.
Right? People are watching. They already trust us. And so you know, they come to us to watch these events. I don't think that there's a company that is better differentiated today today of what I know of what is out there that could potentially, you know, position itself in that space in a very interesting way.
And that, I think, that becomes the combination of community viewing and the ability to wager. Now the question for me is, you know, your business, I'm sure, is the eighty twenty rule. Probably the 20% of users are gonna be the whales and spending 80% of the money. Mhmm. You know, I think we may take a slightly different approach because, again, we're all about sports and engagement, and there and there's communities around sports, and people watch sports together.
It's tribal. I think maybe more of a entertainment interactivity style, maybe something that's more of our approach. But, again, I think that entering that space with, you know, there's a I I don't believe there are many barriers to entry there.
Yep.
But having a point of differentiation, I think, is critical. And, I think the company that I look at when I think of what Fugu might be in that space is is, as you know, Sky plc out of The UK, which is recently acquired by Comcast, had a service called Sky Bet.
Mhmm.
And Sky Bet was the largest wagering platform, I believe, just by volume, in The UK or one of the largest, if not the largest. And so I have to attribute that to its, sort of core television, you know, viewing platform where people are constantly engaged with Sky. So in in my position, this is why I always said it's important to own a maximum number of hours in the house Mhmm. Or in the home. So we're doing a hundred and forty five hours.
If my attachment rates at the end of the year so we look at attachments as sort of consumer relationships just like Comcast or Sky looks at.
Mhmm.
So on a base of 300,000 plus, we sold in 300,000 plus attachments on a one to one basis. And with people watching a hundred and forty five hours and if that if we can get that to two twenty to two fifty, we should be able to sell in to the home many new products, many different products. I think if you recall Reed Hastings' words, he always said, you know, we are competing with sleep. Mhmm. It's one of his most famous quotes.
Well, guess what? We've already have a hundred and forty five hours, which is a ton of hours on a monthly basis. So I think, again, this is a very interesting area. You know, we're looking at it. As I said, we're a very disciplined company.
It's still very small. You don't have national coverage yet. We have marketing relationships with some players in the space. You know, we'll obviously look to do more very soon. But, again, you should look at Fubo from a wagering perspective as one certainly interested in the space, certainly looking at it, certainly partnering.
But as any Internet company that wants to be a global player, you know, we will be opportunistic, opportunistic, and we will look for opportunities to figure out how we can this is an adjacent space that plays very nicely into our video strategy.
One more question on sort of the fundamental profile of the business financial ones to finish up. This last one, you've hinted at it a couple of times already in noting your model earlier of a sort of base package that's lower margin and then apropos of what we were just speaking, adding on attaching incremental products that help drive that margin up. Take a step back to review, I mean, you also mentioned this before, it is almost certainly the number one piece of pushback that we get on this business model in general, and you're highlighting that the company is gross margin positive is I mean, we see that in the filings, but that's helpful. But just let me ask specifically about margins. How do you think about your business building and that combination of attach rate a moment ago plus different packages and different incremental margins they can add?
Yeah. So so we're of the view that the bigger bundle will eventually win just because of the value proposition in that bundle. That doesn't mean that others, you know, other media companies will not have their own services. God bless them. They should all have their own services.
But I believe the majority of US audiences will or or the or US audience would prefer to have a one stop shop, an aggregated service that has all of their favorite networks, all of their favorite programming with, you know, AI and machine learning capabilities that, you know, recommends the things that they want, and and provides them with, you know, non noncontent services that they want to enhance their experience. That, I think, is is the future, for everyone, which is a good thing for media companies because that's, you know, that that's been their main business. They've had certainty around what they're gonna make and what they could spend, and there's no real other way to reach 90,000,000 households. Right? Even if these guys do really well, they'll reach twenty, thirty, 40, or 50, but never a 100, million homes.
So I think the business model, in and of itself, is critical. The attachments, the way the way we build is that we sell on top of the basic pack, we sell attachments like red zone, you know, other sports bundles, international sports bundles, other sort of content that you would associate with an extended basic package like cooking channels from Discovery and, you know, other other other content that you readily see on on television in an extended basic package. So and then with that, we also sell premium channels like AMC Premier and Showtime. So the margin profile on, you know, on second tier or sort of above anything above that basic tier is could be anywhere between 20 and, you know, and and 60% margin. That's just how how it works.
And then on top of that, we have service attachments. Service attachments are things like DVR, family plans. You know, there's other services that we're working on, to enhance that experience. Those margins are typically, you know, 90 to a 100% margin. And then on top of that, we have the ad revenue, which we reflect in our P and L on a net basis post any fees to TradeDesks or Telarias or SpotXs, which, as I said, I'm extremely bullish on.
That is the build. And then on top of that is some future capabilities that you and I just discussed around potentially wagering or additional digital subscriptions that fit very succinctly into our core strategy around sports and video. That's sort of how the margin builds. Mhmm. Long term, I think there's a there's a few things I wanna mention.
One is I'm sure there's many people, you know, that are listening now that think variable variable models don't scale. That has been misproven by Spotify that I think went public with roughly around 18 or 20% margins and has, on a quarterly basis, sequentially expanded to about because I think the last one itself was, like, 27% gross margin. In our world, that is something that we're also focused on. And we have demonstrated that over the last year to go from, you know, negative, whatever it was, like, 15 or 16% gross margin to now positive margin for the first quarter. That that will also continue in a very similar way that that Spotify was able to expand.
What's interesting is that if you take our, you know, current ARPU at the 2019, which was roughly $60 and growing, That is a massive amount of money on a per subscriber basis. Mhmm. I think that number, you know, will continue to grow. But just to take a satellite example, you know, I think if you if you look at some of the 10 k's that I look at, you know, I think they're averaging, like, call it, $85, per subscriber, maybe a little bit more. So we have no truck rolls, no set top boxes, no satellite dishes, no no none of that.
So there's no CapEx in our business. So even if we don't get to a 40%, let's just say, gross margin, we're very comfortable we can still maintain a 15% EBITDA margin just off of, like, a 27 or 30% gross margin. So that that's how we think about the business. There's no CapEx. It's all software.
And, again, we're talking about just the the current business the way it is. Right? We're not talking about any expansions into adjacencies as as you and I just discussed.
Got it.
But for sort of the core basic business Mhmm. Without any new ideas that we're we're obviously gonna continue to introduce, I think that's sort of the the outlook and the potential.
Excellent. We're coming up on the top of the hour here. So we are this is an investor call, so we do wanna bring it home on a few things related to the analysis of the stock. I think you've given us a ton of help to understand how you see both the ecosystem and your product moving up over time and how it may change and evolve throughout that. You've gone through a sort of a, I don't know, we call it a reverse merger opportunity here.
You're looking to uplift the stock here likely shortly. What are the things that everyone listening here should know that may be unique specifically to to valuation, to capital structure, to your management team, to your board, everything else besides the business, what are the two or three most important things that you think investors should know about the company?
Yeah. So look. You know, we are a very young company. I think many times people confuse, how old we are relative to a Netflix, which is over 20 years old or a Roku that's 20 years old or I I believe a Spotify that is approaching, you know, twenty years. This is a five year old company that has moved relatively quickly, in a very disciplined fashion.
You know, we are planning, and uplisting to a major exchange in the third quarter, again, assuming, you know, the macro doesn't change. You know, we've recently brought on board, Edgar Bronfen Jr. As executive chairman of the company, a person that I believe is extremely high moral character. He's a thought leader in the space, a pleasure to work with, very knowledgeable. We've we've recently brought on board Simone Nardi, who's our new CFO, as we prepare for that uplisting, who's got a significant background working at public companies and, you know, most recently spent his time at as the CFO of Scripps Networks, International Group, which is now part of Discovery.
But, you know, worked on the Hulu project in its early days and was a member of GE's finance team. So very good pedigree. And so, you know, the company is preparing for that uplisting, and, you know, we feel that we're we're in a position where, you know, we we have the foundation built. We've been extremely disciplined. And from a growth perspective, if you think about how how quickly we've grown, 2019 and and correct me if I'm wrong here.
If you look at all of these sort of major direct to consumer companies that are publicly traded today, whether it's Peloton or Roku or Spotify or others, in the space, you'll find that their, marketing budgets to total revenue, hovers somewhere in the 35% range. Fubo in 2019 spent, only 21% of total revenue on marketing. So, my point is that we have everything set. We're ready to go. And we are looking to uplift the business as we get into that growth phase.
And the company valuation, just based on it, obviously, this is an investor call. We should talk about the stock. I don't know where the stock is trading today, but let's just say it's in the 10 ish range. We've got roughly 100,000,000 shares. So I feel like it's very early days.
We're at the bottom of an s curve, and there's a huge opportunity for us. And that's part of the reason why we'd like to take the company public. Well, it is public, but, I mean, effectively uplift it to access more capital and build relationships with investors.
Awesome. Well, David, we hope we helped a little bit with that today. And, you know, really a lot of depth that you were willing to offer about the business, and and we appreciate that a great deal. Thanks again. I'm sure everybody is going to be hearing from you a lot more over the next few months.
But for now, have a great weekend, and thanks a ton for joining us, both David and all the guests listening. Thank you.
Thank you so much. Have a good one.
Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.