FuboTV plots path to 2025 profitability

FuboTV on Tuesday laid out plans to achieve profitability by 2025 that include capitalizing on the continued decline of traditional pay TV, capturing shifting ad dollars as spend moves toward connected TV, and amping up interactivity for subscriber retention and engagement.

The key pillars Fubo TV CEO and co-founder David Gandler set out for growth include expanding the subscriber base, monetization through subscriptions (including increased step-ups to premium plans and add-ons) and advertising, as well as optimizing its content portfolio by focusing efficient acquisition (including the launch of more FAST channels, focus on non-exclusive sports rights, and more favorable distribution deals with media owners).

“We continue to work towards long-term targets of adjusted EBITDA profitably and positive cash flow in 2025, and the Fubo flywheel will help us track towards that goal as we execute a plan of controlled growth, alongside margin expansion,” said CFO John Janedis during Tuesday’s investor day.

Fubo's stock soared almost 45% on its first Investor Day, followed by dip of 2% in premarket trading Wednesday.

The company’s 2025 targets include becoming free cash flow positive and achieving a 15% adjusted EBITDA margin.

Janedis said the company has identified cost savings in the “low- to mid- tens of millions of dollars on an annualized basis starting next year.” Based on its expectations of benefits of scale for negotiating outside of content partners “we expect that number will move higher,” he added. Janedis also said he expects Fubo’s revenue to more than double between 2022 and 2025.

In addition, the vMVPD expects incremental savings of up to $75 million over three years as it unifies product teams in the U.S., France and India to all work on a single platform app and backend that combines the best elements of Molotov (a separate video platform Fubo acquired in 2021) and Fubo, instead of working on separate platforms. Unifying the product is expected to enable it to offer a free tier of Fubo in the U.S., and new pay-per-view options for monetization, as well as faster expansion into new markets around the globe, according to chief product officer Mike Berkley.

Fubo is targeting ARPU (average revenue per user) growth of about 8% CAGR by the end of 2025 to reach around $100. That includes increasing advertising ARPU to between $15-20 (up from roughly $8 today) combined with subscription ARPU of about $80.

Competing against cable

During the wide-ranging event, Gandler said the company expects to grow at a 20% CAGR (compound annual growth rate) from 2022-2025. As a virtual MVPD, he pointed out that Fubo doesn’t compete with other streamers in the SVOD world like Netflix – rather its real competition is traditional MVPDs, where he said Fubo offers a lower price with a content lineup that serves as a true replacement to cable.

The traditional cable and satellite model has been under immense pressure, he noted, where sports have largely served as the remaining stronghold – until now, as more and more sports shifts to streaming.

“We believe as traditional linear TV continues to decline, we are uniquely positioned to capture a growing share of television ad dollars,” Gandler said

Fubo’s strategy, according to Henry Ahn, chief business officer, is to bundle as much sports content as possible at in an affordable way, while providing a differentiated experience with interactive features and additional entertainment content to make viewers stick around.

With around 68.2 million U.S. pay TV households, Fubo expects about 8.8 million to cut the cord by 2025 and to continue to capture share of those leaving traditional offerings. According to executives, Fubo has captured around a nearly 40% share of vMVPD net adds in the past 12 months and contends its $70 per month entry point is still significantly lower than the average $130 monthly bill for cable.

After recently hitting a 1 million subscriber milestone, the company expects to end 2022 with 1.34 million paid subscribers in North America and is forecasting 2 million subscribers by the end of 2025. According to Janedis, the company is laser focused on lower subscriber acquisition costs and expects to see a “significant number of subscribers coming through organic or zero cost channels” such as word of mouth or reactivations.

In terms of its audience, Fubo says users of its sports-centric streaming live TV service are unique, engaged, and though initially come for sports are sticking around for entertainment content.  

Engagement, interactivity

Mike Berkley, chief product officer, touted proprietary technology as creating an engaging way to watch live sports on TV – with the tech team accounting for half of the entire company head count. 

Berkley said 96% of Fubo subscribers watch live sports every month, something that also helps with costs.

“This is very attractive from a cost standpoint because we can spread the cost of our sports content across our entire subscriber base,” he said.  Initially started as a soccer-focused streaming service, Fubo now offers 50,000 live events each year.

Berkley also cited “incredible engagement on the platform,” with daily active users watching an average of 6 hours a day and streaming an average of 100 million hours a month - most often on TV sets, something that’s attractive to advertisers.

“This captive audience is also watching on the largest screens in the house, over 94% of all viewing hours are on a connected TV,” he continued. Over 90% of all viewing hours on Fubo are also live TV, meaning many people are viewing the same event simultaneously, which is helpful for interactivity like real-time voting.

Fubo’s Gandler emphasized a focus on adding active features that turn passive viewers into active participants.

Fubo already has some free-to-play games, such as the recently launched “Pick’ Ems” for predicting game outcomes in real-time, as well as  features like Multiview to watch four different channels on the same screen and FanView. Down the line Fubo also wants to add the capabilities such as buying merchandise or ordering food within the platform. It also wants to further integrate sports betting directly on Fubo. The company recently put its Sportsbook business unit under strategic review, looking to partner instead of go-it-alone. Read here for more on the investor day Sportsbook update.

Expanding its offering to include more general entertainment helps minimize the impact of high seasonality on churn, which is a challenge for sports subscription services, according to Berkley, as viewers stay to watch other offerings. While two-thirds of viewers first go to Fubo for sports viewing, sports account for just 27% of total hours watched.

In January, with over 140 million average hours of content streamed, sports accounted for 30%, entertainment 45% and news 25%.

And for advertisers, Fubo executives said its propriety platform, with a tech stack built in-house, is not the dumb pipe of traditional distributors. Fubo collects 2 billion data points a day, which it says helps create a more personalized product experience, anticipates what viewers want to watch and offers insights to advertisers to better target campaigns.

On the sales side Fubo just hired Lynette Kalyor as new SVP of ad sales, whose mandate is to expand key advertising relationships.

Disciplined content costs

On its work toward profitability, part of Fubo’s content strategy involves being disciplined in considering exclusive sports rights while boosting entertainment content through more cost-effective means like free ad-supported streaming TV (FAST) channels.

And executives were clear that Fubo wants to be an aggregator of all things sports but doesn’t believe one single entity can be the only home for sports content, or that any single piece of content is a “must-have.” Ahn said it’s still in the market for some exclusive rights but thinks the most efficient way to pull in sports content is through major media partners. He pointed out that exclusive sports rights have ballooned to an aggregate price tag that exceeds $25 billion per year.

“It is just too expensive, and economically unjustifiable,” Ahn said. 

In non-U.S. markets Fubo sees some opportunities for exclusive sports rights, such as The English Premiere League in Canada, where he said early signup results are encouraging.  

FAST channel growth

As Fubo previously noted, growing its slate of FAST channels is also part of the strategy – having added around 40 so far this year with the aim of 100 by year-end.

FAST channels don’t come with the license fees as traditional cable networks and offer better advertising revenue splits (of 50/50 to 75% in Fubo’s favor compared to a typical 15%-20% split in traditional deals, according to Ahn).  FAST content is also pulling in viewers, with customers watching 25% more FAST channels on the platform than before, helping the long-term goal of reaching $15-20 in ad ARPU. Savings with FAST channels mean the company has more money to spend on networks with sports, Ahn added. It also gives the company more money to spend on networks with sports.

As for content negotiations, Ahn said Fubo is in a better position for deals with content owners thanks to scale, gross trajectory and overall decline of satellite and cable.

In terms of negotiating for content, CFO Janedis also hinted that “not all content is worth renewing”

Executives also talked up a recent first-look deal with Ryan Reynolds that gives the actor an equity stake in the company. Gandler said the deal aligns with aim of growing subscribers and expanding ad revenue, while complementing the content strategy by adding premium programming alongside sports.

Growing add-on take rates

Fubo wants to get more out of the customers not just through price increases, but by bumping them into higher tier plans and selling more add-ons.

Despite price increases over the past few years, co-founder and chief growth officer Alberto Horihuela said that retention rates have continued to improve year over year.  About half of new customers are now taking more expensive premium tiers of Fubo Elite (priced around $80 per month) or Fubo Ultimate (about $100 per month), he said.

“This makes us very exited because we expect it to have a material positive impact on our path to profitability,” Horihuela said.

Marketing initiatives to increase margins include selling higher-priced plans at sign-up, uptake of more add-ons (like a Showtime subscription) and in-platform upsells for premium content. Fubo is now seeing 14% of new customers taking premium add-ons when signing up, compared to just 5% at the same time last years.

Ahn noted that add-on packages are margin positive and help with customer retention. On average, Fubo keeps customers who have signed up for add-ons 28% longer, and they watch Fubo 32% more. Subscribers now average over three add-ons, which he said can also be bundled with upgrades such as DVR storage or additional streams to create higher priced packages.