Fubo marks subscriber and revenue growth in Q1, RSNs help curb churn

FuboTV on Friday reported a strong first quarter that saw double digit year-on-year growth in total revenue and paid subscribers for its sports-centric live streaming TV service. The subscriber additions beat Fubo’s own expectations in a quarter where the virtual MVPD implemented a relatively steep price hike including a new RSN fee, and executives cited to the addition of Diamond Sports’ Bally Sports regional sports networks as helping to stem expected churn.

Total revenue for Fubo was up 34% in the quarter to $324.4 million. Net losses meanwhile narrowed to $83.2 million – a $45 million reduction year over year - for earnings per share (EPS) loss of $0.37, compared to a loss of $0.81 in Q1 2022. Subscribers in the quarter grew 22% to reach 1.28 million in North America. Price increases also helped drive ARPU increases in the U.S., growing 8% to $76.79. In its Rest of the World markets, which includes French streaming service Molotov, Fubo reported $7.8 million in revenue, up 40% from the same period a year ago, and 379,000 paid subscribers, up 24% year on year.

North America ad sales were flat in the quarter, with $22.5 million in Q1 revenue, despite continued pressure on the ad market. Fubo expects reaccelerated advertising growth in the second quarter.  During Friday’s earnings call executives reiterated that Fubo is laser focused on reaching break-even and positive free cash flow by 2025, and in Q1 reduced adjusted EBITDA losses by $36 million year over year to a loss of $58.9 million, and improved free cash flow by $40 million.

“This is our largest absolute dollar improvement in a profitability metric since we've been a publicly-traded company and represents a key milestone,” Fubo CEO and co-founder David Gandler noted on the call.

RSNs help churn

In discussing better-than-expected subscribership growth, Gandler attributed the addition of Bally Sports RSNs (operated by Sinclair subsidiary Diamond Sports which is currently working to reorganize under Chapter 11 bankruptcy protection) as contributing to modest levels of churn and helping keep customers, particularly World Cup and NFL viewers, that the vMVPD would’ve expected to leave after seasonal events concluded.

Fubo in Q1 raised the price of its base plan by $5 per month while also tacking on an RSN fee of around $12 per month for nearly all subscribers.

Gandler noted the recent price changes “had negligible churn impact, supporting our thesis that consumers will pay more for a premium service and underscoring our brand and value proposition.”

The CEO has previously pointed to Fubo’s sports-focused audience as enabling stronger pricing power in the market.  Fubo CFO John Janedis said that while in Q1 churn was up very modestly year over year, the company thought it could have tracked a bit higher, and as of Q2 to-date, “churn is actually down year-over-year.”

Discussing churn during the call, Gandler said the cohorts Fubo had been most concerned about were those that signed up around the World Cup and NFL events, noting usually the company “would have expected them to churn off significantly at greater pace.”

“I think the fact that we did have the RSNs allowed us to give an option to those people to stay on the platform,” he continued. “And so from that respect, the crossover into the RSNs was actually much stronger than we anticipated and that resulted in stronger subscriber additions.”

That said, with Diamond Sports in bankruptcy, some leagues and teams (such as MLB) have been battling over late sports rights payments and looking to alternate avenues. That includes the NBA’s Phoenix Suns, which recently signed a deal with Gray Television to bring local games out of the Bally RSN model and into OTA broadcast (a move Diamond Sports has sued over as a breach of contract).  

Provisions for Bally Sports

Asked on the call by analysts about the status of Fubo’s rights and payment obligations under the Diamond deal if the RSN bundle falls apart, Janedis said there are provisions within the Bally deal “that allow us to reduce payments should certain events occur,” without disclosing specifics.

“From that perspective, we’ve been very happy with our relationship and Major League Baseball has also done a great job,” the finance chief continued.

Fubo TV recently expanded a partnership with MLB, with the addition of MLB.TV to its lineup in March for $24.99 per month. Another thing that worked in Fubo’s favor in the quarter were changes in rules to MLB, particularly around pitching and time clocks.

“All of these things combined have led to some strong results,” Janedis commented.  

The CFO also noted that Fubo has a large number of independent RSNs – and while many teams and RSNs have or are planning to launch direct-to-consumer services, he said it’s important to remember that RSN markets are very small “and it’s very difficult to generate a significant amount of money in small markets,” adding Fubo hasn’t been impacted to the same degree.

“Our relationship continues to strengthen with not only Diamond Sports, with individual teams,” he continued, pointing to a recent agreement with the Boston Red Sox. That partnership for the 2023 season is Fubo’s first with an MLB team and includes Fubo branding and hospitality at Fenway Park, and fan engagement at the ballpark and digital platforms. “I’m sure there are other deals that are on the way,” Janedis added.

More RSNs are also providing opportunity for direct ad sales, bringing Fubo more ad inventory – as Gandler cited a 30% increase in ad avails year over year, which he said comes from adding more RSNs.

“We’re diluting the number of hours people watching on broadcast towards hours watching the RSNs, and that is creating more inventory given the fact that we don’t have inventory in the broadcast nets,” he explained.

Revamped apps coming this fall

Fubo also continues to build out its product, particularly with a focus on eventually delivering a personalized product experience for every customer, Gandler said.

Part of that involves leaning into computer vision and artificial intelligence, leveraging its Edisn.ai acquisition in 2021, as part of its propriety tech stack and a unified platform it continues to work on. Fubo was already the first vMPVD to launch 4K and multi-view capabilities and Gandler teased some upcoming product enhancements.

Short-term Fubo hopes to boost engagement on the platform, with users now averaging 100 hours of viewing per month and he said “you’ll see fresh apps sometime in the fall” tied to the unified platform and driven by new back-end infrastructure and design system. 

“We plan to transform how users engage with streaming video and traditional DVR,” Gandler said. 

The company is starting to use AI to sync data sync, which it will first put to use in syncing FanView data with what’s on screen. While the task might seem simple, Gandler said, he explained multiple data sources come in simultaneously, often either with video or data behind. The goal is for both to be come in at the same time for a better consumer experience.

Fubo’s also working on instant highlights including DVR features users could go into a specific view and see different plays and game highlights.

“Think about condensed games within your DVR, where we’ll be leveraging all of our AI opportunities there,” Gandler said.  “And then as part of that, when you’re watching games, you might also receive some type of alert that there’s a game that’s on that might also have some very compelling moments to watch, and those will also be part of your DVR instant highlight opportunities.”

Fubo raised its full year 2023 guidance for North America to 1.55 million-1.57 million subscribes and total revenue between $1.23 billion- $1.26 billion.