Fubo CEO David Gandler on Friday suggested the vMVPD is willing to go to the mat in its legal battle against the sports streaming joint venture formed by Disney, Fox and Warner Bros. Discovery, calling it a “duel to the death” during the company’s quarterly earnings call.
Fubo recently filed a federal antitrust lawsuit against Disney, Fox and Warner Bros. Discovery, accusing the entities of years-long anticompetitive practices. During the vMVPD’s Q4 earnings call, the CEO categorized the JV’s plans to launch a sports streaming app this fall using combined sports assets as an “attempt to monopolize the sports streaming industry and eliminate competition.” The forthcoming app is seen by some as a threat to Fubo’s sports-focused vMVPD competitive advantage and the lawsuit seeks to enjoin the JV or require restrictions, such as economic parity of licensing terms, and “substantial damages” from the defendants in an unspecified amount.
As Fubo reported Q4 subscriber and revenue growth and on the earnings call Gandler said the JV is “just the latest example of the sports cartel’s attempt to block and steal Fubo’s vision of what a sports streaming bundle should look like, resulting in billions of dollars of damages to our business. We consider the defendants’ pernicious contractual terms and other anticompetitive practices borderline racketeering.”
The “duel to the death” comment came in response to an analyst’s question about Fubo’s propensity to dig in and defend itself or potentially relent if it doesn’t see progress in a legal battle.
“We are fighting for consumers. We are fighting for our customers. We are fighting for the tens of billions of dollars that are wasted annually by consumers paying for the same content multiple times,” Gandler said. “This is a very important process. We are sticking to our principles, to our guns, and we’re continuing to be able to chew gum and walk at the same time, as you can see from our numbers.”
Fubo asserts the media companies have levied content rates on the vMVPD “that are 30% to 50% plus higher than those of other distributors,” forced it to license non-sports content that viewers don’t want in order to access must-have sports programming, imposed “above market penetration rates for this content,” and restricted its ability to offer certain features while allowing competitors and their own services to do so.
“Consumers deserve choice. They should only pay for the channels they want,” Gandler commented Friday. “They should be able to access delightful product features to enjoy the streaming experience the way they want to and they should get all of this at a fair price.”
Asked on the call by an analyst about potential impacts if the DoJ or another entity doesn’t get involved on Fubo’s behalf, Gandler said it’s difficult to say but thinks the status quo would remain, with Fubo having to deal with “unreasonable and above-market economic terms,” as he said it has done for many years.
In terms of costs, Janedis said the lawsuit is factored into Fubo’s budget but “too soon” to share numbers for total cost of a legal battle. Gandler also emphasized the company is mainly seeking parity for licensing and penetration rate terms, as well as some restrictions it currently experiences. For example, he said Fubo isn’t able to sell Disney’s ESPN+ streaming service even though the vMVPD offered to pay for it and Charter secured a programming deal with Disney to include the app in certain of the operator’s pay TV packages at no additional cost.
Despite solid quarterly results, Gandler suggested the company’s earnings could have been better if it was able to compete on market terms that were in line with other distributors “such as Hulu, Comast, Charter and DirecTV Stream.” He said Fubo in 2023 was forced to pay more than an estimated $200 million to all of its media partners for unwanted content, and alongside penetration rates and excess fees, where otherwise “we believe Fubo may have been able to breakeven in 2023.”
The company still cited confidence in its ability to achieve its target of positive cash flow in 2025.
Fubo aims to be a TV aggregator in the sense of bundling a wide-array of sports content, including regional sports networks (RSNs), alongside entertainment and free ad-supported programming within a single, personalized app experience that offers features like 4K and multi-view capabilities. Gandler reiterated that its aim as an aggregator doesn’t mean Fubo wants to be an app store.
To that end Gandler said it’s planning to build on advertising growth and launch a completely free ad-supported tier in front of its subscription paywall the second half of 2024. That tier will utilize the roughly 160 FAST channels that are already available within the Fubo live streaming TV subscription to retain and monetize users who sign up for Fubo but don’t convert into paying users or cancel a subscription, in order to keep them within the Fubo ecosystem. Gandler said its focused on continuing to develop in-house technology that will enable it to create more personalized experiences and upsell customers on TVOD and pay-per-view events initially. For more on Fubo’s view of its ‘freemium’ business, read here.
Earnings results
Fubo in Q4 beat its own expectations for subscriber growth and alongside revenue increases cited confidence in achieving its 2025 positive cash flow goal.
In Q4 it counted around 1.62 million North American subscribers, up 12% yoy from the 1.46 million a year ago, and up from the 1.47 million it had at the end of Q3. It also continues to expand the amount of revenue it’s generating per subscriber. In Q4 ARPU in North America reached a company high of $86.65, largely thanks to pricing initiatives including increases throughout 2023.
Total Q4 revenue of $402 million was up 29% year over year, while global ad revenue of $39 million was up 15% year over year.
Fubo recorded a Q4 net loss of $71 million, reflecting a $25 million improvement from the same period a year ago. Its fourth quarter adjusted EBITDA loss of $50.7 million also improved and compares to a loss of $75.4 million in Q4 2022. The company cited improvement across ARPU and advertising revenue, as well as narrowing subscriber-related expenses.
Despite positive fourth quarter results, Fubo didn’t guide for major gains in the year ahead, saying it reflects some conservatism in the vMVPD’s plan, especially from “exposure to potential industry volatility.” For the full-year 2024 it expects North American subscriber between 1.665 million and 1.685 million, and revenue between $1.505 billion to $1.525 billion. in the first quarter it expects subscribers of 1.415 million to 1.435 million
“We expect significant revenue growth outpacing subscriber growth due to anticipated ARPU expansion, given our continued focus on unit economics and margin improvement,” said Janedis.