fuboTV Inc. (FUBO) Earnings Call Transcript & Summary

Right? So I think that eventually, all things come full circle. And we've said in many of our letters that we're going from bundling to unbundling to rebundling. I think the aggregation business is really the only place where media players can really enjoy strong profits.

So on a linear basis, I can get cable, I can get satellites, sometimes I can get a TV-backed video product sometimes. But there's a solid 5 streaming bundled players. Is that sustainable long term? How do you think about that?

You're talking about our space.

Your space, Stream, Sling...

Yes. Okay. I mean, listen, let's pretend the streamers weren't there. you still had DIRECTV, now called Stream in our space. You still had DISH now called Sling in our space. And so I would argue they're probably besides the small 400-plus cable companies, cable operators out there that have -- from 50 customers to a million customers, there are probably 5 or 6 major players that existed, right? Charter, Comcast, DISH, DIRECTV, Altice, Cox. There were many players. So I think that the market can support 3 or 4 players for sure.

Does it make sense to combine with any of those?

I mean it's actually a very interesting question because for the last 4 years, media companies have been consolidating and distributors have not. And so I do think that there's probably some -- again, this is theoretical. I would assume that there are companies out there that are thinking, "Well, do we need scale?" Right? And I think it makes a lot of sense.

Yes. And not all of those are growing, and some of them seem to be somewhat stepchildren within the media companies' ecosystem.

Yes, that is definitely true. But I do think that there's probably an opportunity. Definitely, there will be dialogue over the next few years with some of the major players. Not for us. I'm just saying generally speaking.

How should we think about you making your product better in the meantime? I think there's been a couple of announcements, but talk to us about what the -- how the product is evolving.

Yes. I mean we -- I would say we're some more -- I would say we're closer to a Spotify than like a DIRECTV or a Comcast. We believe in product. We have been first to market with features like 4K back in 2018 for the World Cup. We've been first to market with something we call Multiview that now some of our competitors have been talking about, including Apple, I think now. I think I saw them start posting on their homepage that they're also doing a multiview. So product is a core component of our business, and so we've made some strong investments. I think going forward, what you'll see is we're going to finish our -- we're in the process of combining the French acquisition with our own back end, and so we call it the unified platform. So beyond that, the platform is going to be pretty robust, and we'll be focused on really improving the core product. So think about fluidity, performance. I know performance has come up in the last couple of weeks with the playoffs that a lot of folks were underwhelmed on multiple services that they weren't able to watch games the way they had anticipated. So that's one area. The second area is going to be our advanced DVR, which we -- is probably what you're talking about. We started some beta testing there. I think that that's a really powerful tool for us. I think that I think when all said and done is we'll probably see some significant upgrades to the DVR that we probably haven't seen since the advent of cloud recording. So it's basically taking some of the Edisn.ai technology that we have developed. And think about indexing all of your all of the videos in your DVR. So could can follow a team. You could follow a player. And you can follow a company. You can follow a politician. And all of this would be personalized for you. So -- and that can be done in many different ways. That's sort of the power of computer vision technology. And then beyond that, it's going to be -- again, we're focused on deeper personalization. So extracting, again, using computer vision technology and artificial intelligence through our Edisn.ai acquisition to really focus on extracting maximum amount of metadata to more accurately provide recommendations and discovery of content, which on our platform, if you think about our strategy, it's always been come for the sports, stay for the entertainment. So it's very important for us to ensure that we are surfacing content to drive advertising sales. So those are kind of the key areas. And then one of the cool areas probably further down the line I can get into is probably around conversational UI, which all of that is attached to computer vision. Think about you've DVR'd, I don't know, 10 college football games over the weekend. And you say, "Hey, fubo, show me 7 minutes of highlights." Now we should know the types of highlights you like, whether it's interceptions or sacks, or whatever it is that you like, the machine should be able to really create a very efficient user experience. So those are kind of areas that I think from the product side we're very focused on. And video quality is another one, which always comes up for sports, in particular. So I think we've made a lot of inroads there. And over the next 24 months, we'll look to like release some of these things in beta.

How do we think about what that -- give me another example of the DVR innovation. I have a DVR that I never use anymore. Why do I bother with that?

Yes. So okay, let's say you went away, you were on vacation out of the U.S., you can't use your cable subscription. So you DVR'd 10 different things across sports for the week. You can do a couple of things. You can say show me every 3-pointer that was in the last -- that was shot in the last 2 minutes of a game with a score that was maybe a 6-point game spread, right? You can ask questions like that. You can also wait until the end of the season before the Super Bowl and say, "Hey, show me every pass that this quarterback has thrown on Sundays, and whether that was below 30 degrees." So it's a really powerful way to allow you to experience content, especially in an environment where you have hundreds of channels. We have tens of thousands of VOD assets. So I think over time, it's going to really be -- the factor is going to be being able to sort of index all of this in a way that allows you to maximize your subscription.

So advertising is one of the things you mentioned, and talk to me about the sort of progression of advertising at your business and where this can go, especially as you get more sort of personalization and recommendations get a little better.

Yes. So I think the good news for us is we -- just to sort of back up a little bit. So one is we -- of the services in our space, I think if you look at any research report, you'll see that we tend to skew younger on persons 18 to 49 or probably, I would say, around 42. So that already is a very important demographic to hit, particularly when TV -- I think 22% of TV viewership, like traditional TV viewership is persons 18 to 49. So that's one element that I think is extremely important. The second thing is because our product is a premium product, $75 plus, people -- as people pay for that product, advertisers will probably look to engage with customers that have discretionary income. So that's sort of a second, a very important element. Think about people who watch free TV don't want to pay for TV. So what do they want to buy? They want to buy generic products because price is the key parameter for them. So those are sort of very high-level basic reasons why I think the platform starts to perform on the ad side. But then as you kind of get into all this personalization, I mean there's a ton of data. We already collect about 2 billion data points a month, but this would really allow us to understand lots of things. What are people's political views, right? Because you may say show -- because we have about 40 or 50 news channels now in the platform. You could say -- maybe you're not -- maybe you're an independent voter and you say, "I want to see everything on Trump or I want to see everything on Biden." You don't care what channel it's from. You just want to see all the news. So I think all this personalization allows us to actually create very, very rich datasets over time and allow us to charge a premium for certain cohorts.

I'm always waiting for my TV to be filled with bicycles and surfboards, and then I would spend money. But until then, I just don't want to buy any of that stuff.

That's a good point.

So gaming has been something that you've sort of been in and trying to do with tougher cash environment. You've sort of pulled yourself out of it. Talk to me about the -- both for fubo and just the market in general, where does the gaming space go and tie into sports on the video side? How do you see that sort of long term?

Yes. So it's interesting because part of the reason for getting into gaming was the whole concept of interactive television, right, the gamification of watching TV. So all of these things we're doing on the advanced DVR side, not only for sports, it's just for general viewing as well. We thought -- I thought that, that would be a great fit for people, right, where you can actually play, right? And I don't mean like Las Vegas play, where we were looking for Whales. The point was to create more engagement on the platform. I think that it still makes a lot of sense. I think with the computer vision technology that we had, we thought the interesting piece would be that because you can actually track -- recognize and track objects on a frame-by-frame basis, if the ball is down here somewhere in the quarter, there's empty space here. You can flash something for 5 seconds that says, "Will he score? Will he not?" Right? Will he jump? Will he fall? Will he -- so it gives you a chance to kind of create some of that engagement. Again, not for everyone. Some people are passive viewers. They don't need that. But I do believe that there probably is value and active participation, and that also drives organic marketing. And so I think that when we wanted to get into gaming, I think it was around November of 2020, we were thinking about it before, but the cost of capital was 0. So we thought, okay, so over time, if we invested a few hundred million dollars, and we didn't have to invest that money in marketing, we could probably benefit on both ends. One, you have more engaged subscribers, you have better retention, and then you have an additional revenue stream. So -- but we quickly, I would say, reacted to the market conditions and pulled out because it was not realistic to continue down that path. That doesn't mean we don't like the idea. The idea is still there. I think it's just a matter of building out some of these capabilities and then working with partners that are in the gaming space to see how we can sort of monetize that audience together.

Is it inevitable that gaming and sports on TV will go hand in hand?

Well, I think if you think about just the whole ecosystem and how much money leagues make, right now, everybody is over monetizing, right? So the leagues are making a tremendous amount of money. The sports networks, television networks are also over monetizing, right? I think we can all agree on that. And so in order at some point to rationalize that, you're going to need some other method to be able to deliver a very effective business, and so I think that there's probably a very high likelihood something will happen. Now one might argue, a skeptic might say, "Yes. But -- okay. So at some point, they'll want to eat into that money, too." So -- but that's part of the game, right? But I do think that those 2 kind of -- they go together.

And are there markets around the world that you think are a good sort of direction for the U.S. in terms of what that looks like?

I used to think that Sky did a good job many, many years ago before Comcast had acquired it. But yes, no, I thought they did well. They had a product called Sky Bet. And I think it was -- they came into the market maybe 5 or 6 years after sort of it matured, and they were able to really grow very quickly. So that's a market that I think we look at as something interesting. But again, we're very focused on video, number one; and number two, we are extremely focused on our 2025 profitability target.

Okay. Well, let's go back to advertising. So you're building this up. Where is the market now? And what's your ability to sort of get the right inventory and monetize that?

Yes. So I mean the good news is we have sports content, and it's live, and it's probably the type of content that most advertisers want to be adjacent to. And I think the brand awareness tied to professional sports, I think, works well for everyone. I don't know the last time you saw a YouTube -- not YouTube TV, a regular YouTube ad. And you said, "Hey, I saw this Toyota ad on YouTube." Like I don't know if people think that way. I can't remember personally any ads that I've ever seen on YouTube. So I'm not sure that's a great medium. But with the sports component, I think people tend to remember and they also remember lots of things from different commercials throughout sport. So I think that, that, to me, is probably one component that makes this whole thing very important. And it differentiates from Netflix and Disney+ and all of these other services, coupled with the fact that we have a strong audience and a premium-priced product, I think all that bodes well for us. But I think the problem -- not the problem, but I think the delay that we've seen is because you need scale to sell ads, and so you can't sell more ads than you have users, right? So you're going to see that ads will follow sub growth, and you've seen that. I think we've grown our ad number significantly in 2022. I think we just barely exceeded $100 million of ad revenue. And so we think that, that trend will continue going forward. And then when the macro kicks in, we'll start to see that asymmetry go from like a percentage of revenue basis.

Where are your -- you've been pretty open about your CPM numbers. Where are your CPMs for football game versus an NBC CPM for football game?

Well, that's what's the exciting piece for us. We have -- because we've had a much smaller team, and I would say we're probably the most efficient company in the streaming space, and we have been for a long time. We have not had the opportunity to really develop our ad sales team. We've started to do that. And so the way we would monetize is almost -- I think it's like 95% programmatic, right? And now there's positives and negatives as it relates to programmatic. But I'm talking about specifically programmatic non-guaranteed, which is probably the lowest value inventory/CPM. Now it's typically sold on a blind basis. And so in order for us to scale out our advertising business, that was sort of the key method of sale for us. So I would say our CPMs are about, I would say, about 50%. There's room -- there's about 50% room for us to grow those on the sports side, but I would say if you're thinking about like premium football, I'll use -- I'll say NFL college football, if you think about local markets, and you guys can probably tell me from if I'm right here, but I would say local markets like San Francisco, New York, Miami, Boston, I think those broadcast CPMs can range anywhere from $70 to like $120. I haven't looked at that this year -- last year. But the year before that, I think that was probably the range. So I think for premium sports, we're probably -- when we go out to market ourselves, it's probably in the, I would say, low to high 40 -- low 30s to mid-40s. Somewhere there. So we have...

50% to 70% discount.

Yes. But as John mentioned, I think, in one of our meetings today, one of the interesting components is that for the cable nets -- our CPMs are actually the same as our fast channel CPMs, which is actually quite remarkable if you think about it. So that really speaks to the quality of the audience when we go out and sell it. So I think over time, over the next 12 to 18 months, the goal is to actually go out to market, explain our product, talk about our audience. And of course, we want to be part of the buy. Now you may say, "Oh, but you're smaller and you're this and you're that." That's great. But the reality is, is that we have some percentage of the total addressable market. And so if you buy a YouTube TV or you buy Sling, I mean we have audience, too. So if you care about reach, you're going to have to buy us anyway. So I think we're very well positioned, but we have a lot of work to do. And so we're investing in technology, measurement, attribution, all of those things, and sales staff.

So we talked about the potential scaling on the content side of costs. What about on SG&A and the rest of the cost of running the business? I know John has been doing a lot of work on this in the last year. But how much more is there to go?

There's always more. You know that. We all know that there's more. I think, well, if you look at our -- I don't know if we had a graphic in the -- in our letter, I think we did. Our operating expenses, if you look at every single line, I think we've improved on every line actually. So we've improved on, I think, our subscriber-related expense line, don't quote me on this, was 101%, came down about 93%. I think our marketing -- sales and marketing line went from 18% to 13%. Think about that. It went from 18% to 13% of revenue, and I think we beat -- we exceeded guidance fairly easily. And so if we just had that same budget, think about where those numbers may have gone. So sales and marketing, technology, I think that's also come down significantly. I believe that there's more room.

And there's more room to come down on a dollar basis, not just as a percent of revenue as you scale.

I would say, in some cases, both. I think one area where there's real opportunity is the SaaS space. I think if you -- we were a start-up for the last -- until 2020 when we went public. What's interesting is that nobody ever looked at cost. When you start a company, Amazon, Microsoft, Google, they all throw credits at you. And so when you get all these credits, it's free money. No one looks at like compute and all of these different costs. And people are -- when you start to spec out what you're going to build, one of the variables is never like efficiency. How efficient are you architecting your platform? I think with this push towards profitability and everyone's focus on EBITDA, companies are now going to start looking at cloud costs. They're going to look at all of their SaaS services. Do I really need all these SaaS services? Many companies probably haven't renewed their contracts. I'll raise my hand here for 2 to 3 years. Because who cares? We're growing, we're moving, things are going well. And as you start to kind of look through all of the deals, all the SaaS services that you subscribe to, you start to realize, wow, that volume back then was like 1/20 of what it is today. And so I think that John and the finance team has been very focused on continuing to review those, and I think there's more room there. So this gives us a little bit more room for error, right? If we miss something somewhere, I think that on the cost side, I think there's probably some good room there. I mean we spend a lot of money, right? I mean it's a pretty big platform with thousands of channels, I think with millions, tens of millions of transactions. So there's room for us to continue to improve these deals.

Real quick, I had one come in. You're building your own data center. What should we expect in terms of the cost to do that?

So we're still -- so I just want to remind everyone, we have over 2,000 feeds. So I'm not saying it makes sense for everybody. I think we've seen 2 things. One is we've seen cloud costs also decline, again, because we're being proactive about it. But at the same time, I think that there's probably room for -- through 2025, it's going to be a good 8-figure savings out of that. It doesn't take a lot of people to run that. It's basically we're taking that same team and now saying we need you to do some additional work. But we have like EPL games, and we have all kinds of content that -- and again, our business is video. Like if anything, you've shown something you've shown your video infrastructure. If you don't believe me, just again, look at the NBA playoffs and how many issues you saw from multiple services being able to deliver those games directly.

Right. I want to finish it up, we're overtime. But really quick, your confidence in having enough cash to get to breakeven you've talked about in 2025.

Yes. Look, I've said I'm confident. The reason why I'm confident is, one, you've already seen a significant improvement in cash usage year-over-year. That's just one data point, I get it. But we have many levers to pull. We still -- I still believe we have pricing power, number one. Our ad business has a lot of room for growth, so that's just on the revenue side. And then on the cost side, as John will tell you, we have every single team now. One of the key variables as to whether we -- or how we architect is the efficiency of the architecture. And every day, we find tens of thousands of dollars daily of cost savings in the tech stack. So again, you have cost levers, you have marketing lever, you have the advertising piece and pricing power, and you've seen that work out. So I think that we don't have to pull all those levers. We can pull some of them. Retention improvements, all of these things, I think, will lead to -- and then renegotiating some of these deals. In some cases, there could be more content drops. So -- and also the discovery of the fast channels on the platform, that has also led to increased ad inventory. So there's just too many levers here for us not to be able to get there. Of course, we have to be diligent. We have to execute well. But I'm confident, I believe the others are confident as well, that we'll be able to deliver that number.

That's great for us to leave it. Thanks, David.

Thanks, everybody.