FuboTV streaming subs hit record high in Q3, CEO explains FAST channel rationale

Virtual MVPD FuboTV reached a record high for its North American subscriber count in the third quarter, ending the period with 1.23 million paid streaming TV subs in the region.

That’s around 284,000 more than Fubo ended Q2 with, when its North American base stood at 947,000, and reflects a 31% bump from Q3 2021. Fubo expects to end 2022 with about 1.36 million North American subscribers.

For international markets (or Rest of the World/ROW) Fubo TV ended Q3 with 358,000 paid subscribers and $5.8 million in revenue.

Alongside subscriber growth, Fubo reported double-digit year over year growth for total revenue and ad revenue in North America. In its home market revenue of $219.2 million was up 40% from a year ago, with ad revenue climbing 21% to $22.5 million. Subscription revenue in North America rose 42% from a year ago to $196.3 million.

Fubo CEO and co-founder David Gandler said in a statement that in the most recent quarter the live streaming TV service also had record-low churn.

“We are more bullish than ever on our model as consumers gravitate towards aggregated streaming platforms that offer popular content presented to them through a custom and personalized experience,” Gandler commented.  

The company also likes dual revenue streams of subscription and advertising.

“As consumers continue to become disillusioned with the many expensive and content-limited streaming services in the market, and those streaming services turn to other monetization levers like advertising, we are excited about our unique positioning in the marketplace,” said Edgar Bronfman Jr., executive chairman at FuboTV, in a statement. “We believe our dual subscription and advertising model provides value for shareholders while our aggregation of premium sports, news and entertainment content is an affordable option for consumers.”

In October Fubo TV announced it would shutter its Fubo Sportsbook wagering business, instead opting to focus resources on the core streaming business as the cost of capital increased and a strategic review failed to find a profitable path forward. In reporting Q3 results, Fubo said it’s still focusing on data and interactivity, with a belief in the combo of gaming and live sports streaming.

“As a result, we are exploring ways to optimize our user base in the gaming space without investing our own funds,” Gandler said in a letter to shareholders.

On the advertising side, Gandler emphasized a focus on investing in the ad team, technology and infrastructure – marking improvements in the period for higher CPMs (or cost per thousand) and fill-rates. CPM growth was up about 6% from last year. The company beefed up new ad inventory, which Gandler said has already sold out for the fourth quarter. Growth on the advertising side comes as streaming players have reported impacts from advertising pullback amid macroeconomic downturn.

As for SVOD players Disney and Netflix joining the ad-supported video fray, Gandler thinks it will help Fubo. He pointed out that Fubo subs spend over $70 per month, demographically skew male in the 18-49 age range, and are difficult to reach on traditional TV.

“I think the positive side of Netflix and Disney is that they’re actually going to take our message to market,” he said, adding Fubo thinks buyers will likley be more active in the connected TV space, with around 90% of Fubo’s inventory in connected TV.  

As a virtual MVPD, Fubo’s lineup is more akin to a traditional TV provider than SVOD streaming service, though aims to use tech and personalization to deliver a sports-centric yet comprehensive TV user experience.

Rationale behind FAST channels

While Fubo TV is a sports-centric virtual MVPD, it’s also working to expand entertainment and other content offerings including with the addition of free ad-supported streaming TV (FAST) channels. 

FAST, as a percentage of ad revenue nearly doubled compared to Q2. While Fubo CFO John Janedis acknowledged it’s still not a huge number, the trajectory is looking good, he said.

Fubo ended Q3 with 60 FAST channels (it previously laid out a target of 100 FAST channels by year-end, and Janedis said if they don’t reach that goal by the end of the year, it will by early 2023).

In Q3 3% of viewership was on FAST channels and Janedis said this allows the company to create better leverage for itself as it negotiates to renew entertainment deals.

During Friday’s quarterly earnings call, one financial analyst raised the question as to why, if consumers spend a lot of time on FAST channels they wouldn't question paying a monthly subscription price for Fubo when FAST content is available for free on several other platforms such as Roku, Vizio, Samsung and others. The analyst also asked whether Fubo is looking to execute exclusive arrangements for FAST channels (something, as Fierce has previously reported, is a rarity at this point).

Gandler, in response, pointed to viewers paying for broadcast channels included with pricey cable subscription packages, even though they could also be found for free with an over-the-air antenna.  Essentially, Fubo TV’s aim with FAST channels is provide as much content as possible, with customers paying for the premium product such as sports like the NFL and World Cup, but then getting the benefit of Fubo’s aggregation, along with AI and discovery engine, in surfacing relevant and personalized FAST content. While the aggregation piece is good for consumers, it also helps Fubo to keep them on the platform and drive engagement.

“What I would say is Fubo is pretty much a gateway to television and entertainment,” Gandler said.  

“So for instance, if you’re watching a design show on Bravo or on HGTV. If we surface a design show from a FAST channel, I don’t think a customer will care where that particular piece of programming comes from.  I think what's important in this case is that the customer understands that we're actually providing an amazing service. The ability to give people all of the content in one place effectively, efficiently with a solid user experience,” he explained.

As for exclusivity, he said Fubo’s proven it can “compete head-to-head on a non-exclusive basis.”

That said, earlier this year Fubo inked a deal with actor and entrepreneur Ryan Reynolds and his Maximum Effort Productions studio to create original content. Gandler said it expects to launch a Maximum Effort channel in mid-2023, with Fubo managing all advertising sales and planning to partner with brands to minimize incremental costs to the company.

Subscription stacking

Fubo TV believes its also well positioned in the fragmented streaming market as consumers having to subscribe to, or stack, multiple streaming subscriptions to get access to content they want – while many in the industry are also raising prices.

A recent TiVo survey found consumers on average use nearly 10 different streaming services or apps (including free and ad-supported services).  

Fubo itself effectively raised the price of its base offering earlier this year when it dropped a Starter tier and migrated existing customers to its Pro plan, which starts at $70 per month.

“And with streamers increasing their investment in original programming and passing these costs to consumers, the monthly subscription fees of all these stacked services in the aggregate are now approaching the cost of cable,” Gandler said, adding that viewers who watch sports are not turning to plus and direct-to-consumer streaming services.

“These are key dynamics that inform why we are more bullish than ever on our aggregation model, a model that offers consumers a streaming platform with unique content both live and on-demand, and that is presented to them through a personalized experience,” he continued.

While total global revenue was up 43% year over year to $224.8 million, Fubo recorded a net loss in the quarter of $152.7 million. Third quarter adjusted EBITDA loss of $92.7 million compares to a loss of $81.3 million in Q3 2021. Fubo revised its North American guidance upward, with expectations of full-year 2022 revenue between $949 million to $954 million.