FuboTV Inc. (FUBO) CEO David Gandler Presents At Deutsche Bank 30th Annual Media, Internet & Telecom Conference (Transcript)

fuboTV Inc. (NYSE:FUBO) Deutsche Bank 30th Annual Media, Internet & Telecom Conference March 15, 2022 11:05 AM ET

Company Participants

David Gandler - Co-Founder and CEO

Conference Call Participants

Bryan Kraft - Deutsche Bank

Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.

Bryan Kraft

00:04 Okay. All right. So welcome, everyone. Really, pleased to introduce David Gandler, who is the Co-Founder and CEO of fuboTV. David, welcome.

David Gandler

00:22 Thank you. Thank you for having me.

Bryan Kraft

00:25 Why don't we jump into it. So fuboTV has been growing subscribers faster than the other virtual MVPDs and the industry broadly. You seem to expect that trend to continue based on your subscriber guidance. What has made you so successful in the marketplace to-date, and how do you differentiate fuboTV from competitors virtual MVPD services?

David Gandler

00:47 Yeah. So Fubo sits at the intersection of three mega trends. The first, obviously, is the secular decline of traditional television. The second is the shift of TV ad dollars to connected devices, and the third is online sports-betting. And I mentioned that, because we have positioned ourselves in the virtual space as a sports first cable replacement service. And so there, I would say three vectors on which that has resulted in the type of growth that we've seen. And by the way, that growth is about 3 times the virtual MVPD space, which is pretty impressive.

01:26 So the first vector obviously is on the brand side. We have positioned ourselves as a sports platform, whereas I would say Hulu, Sling, YouTube TV and others are more general entertainment platforms, despite the fact that they have a significant overlap in sports. So if you're familiar with the cable space, I would consider it more, like, if you think of old-school DIRECTV whereas, if you like college football, you would say, I need to get the DIRECTV package. While you could have gotten any other satellite service. So I would say on the brand side is number one.

2:00 The second piece is on the product side. We've spent a lot of time developing a product, which by the way for the first-time in fourth quarter, we had the highest NPS score of any of the virtual MVPDs. Again that's not easy when you're competing with a company like Google. And so from a product perspective, we've built out features like sports calendar views and one of our top features like a Multiview, where you can watch multiple games concurrently, and then we've built out predictive games and we're the first to launch 4K for sporting events. So that's on the product side.

02:39 And then on the content side, we have also have been doubling down on more expensive sports content as some of the audience may know. We have the largest portfolio of regional sports networks. So those are the vectors, in which I think that we've been able to differentiate.

Bryan Kraft

02:57 And can you talk a little bit about the content strategy for long time, you didn't carry ESPN, now you do, but you've dropped the Diamond Sports, RSNs and Turner. What's the approach in deciding what to add and what to keep and drop? What led to the specific decisions on ESPN and Diamond and Turner?

David Gandler

03:19 So Fubo collects over 20 billion data points per month and the company is extremely data focused. And so when we look at content partners, we look across acquisition, engagement metrics for that piece of content, retention rates, and monetization. And based on the data, we've taken a bold move as you said, I think we're the first pay TV platform ever to drop a major media partner and still not only grow, but grow at a very impressive rate. So, we're very confident in the data decisions that we make, but that continues to be part of the calculus.

04:09 Now what also happens in that case is that, as we look at that data, remember the data -- we're updating data all the time. So we'll typically try to optimize that bundle going forward. So, you didn't see ESPN as you said, we added ESPN, removed Turner. The key is that everybody wants to be on the platform, particularly as you scale over a million customers the money is just too good to pass up.

Bryan Kraft

04:35 When we spoke about a year ago, you had just acquired Vigtory as part of your, launched here on Sportsbook. Can you remind us what led to the termination and answering sports betting was a better option and partnering with an existing player already in that business? And can you talk about how the Vigtory acquisition and strategy has played out so far?

David Gandler

04:56 Yeah. So as I said we positioned ourselves as a sports first platform. So part of that is creating a more immersive experience and making, moving people from being just passive viewers to more, I would say active participants and that's sort of the macro that you're seeing across everything. People are in Metaverse and gaming and all of these trends really speak to the fact that people want to -- again, a more immersive experience. So bringing gaming into the fold seems like a very good idea at the time and we now believe -- now that we've launched two very small states. We're doing a lot of testing, but the crossover rate of people who have our subscription product and a gaming app have shown two very important things.

05:53 The first trend is one, they're making more bets than someone who just had a sportsbook, again all this is just directional at the moment because we've only been live and for about 50 days or so. And then the second is, they've retained better at least in month one than someone who just came in to test the book. So I'm very bullish on the opportunities around gaming, because if you think about it, Fubo has over 1 million customers today. And I'll just use DraftKings as an example, but they have 2 million customers.

06:28 And they've been pulling from their fantasy into their Sportsbook, we have a base that is 96% of our users watched sports, and 90% watch live. So when I take a game like the Super Bowl, concurrently, we had about 810,000 people. Again, that's not the total number of people watch the Super Bowl that is on a per second concurrency level of 810,000, so think about the macro there. You have almost half of a DraftKings base, watching a game and if you can just them or put up something that says bet $5, bet $10, bet on your favorite player. Just think about how immersive that is, number one.

7:14 And number two is, I think about the ability to reduce the cost of entry, right and create very attractive user economics. So from our perspective, we've now have 10 market access deals. We're going to continue to expand that and we'll try and align the market access deals to our subscriber markets. And with the goal of ultimately creating a national platform. But all of this is really about creating flywheel, because as you add gaming what's really happening is one, acquisition costs are down, because you're leveraging your TV subscriber base.

07:48 The second thing is you have more engagement. When you have more engagement, that means people are watching more ads and you can drive more ad revenue. Number three, you retain customers better because you have a very unique product. There is nobody in TV today that is attempting to do and we're already making strides in that to do what we're doing and the gaming companies cannot become media companies. And if you're sitting there saying, well, how could that be? Very simple, NFL deals are up in 2034, The Olympics, The World Cup, March Madness, all of this, all the major sporting events are up in 2030 plus.

08:29 So we're in a very unique position with very high barriers to entry with a captive audience watching 130 hours. So for me, this really allows us to expand our ARPU improved unit economics.

Bryan Kraft

08:44 Are you only targeting your subscriber base, and if so, can you get to a level of sufficient scale in sports betting just in your base?

David Gandler

8:56 Yeah. Well, our CFO, John Janedis is with me here today. We were just talking about this. We just ran an exercise internally where if -- I don't want to give away numbers, but for us to breakeven on the gaming side, we actually need a very low number of players to participate because there is no really no acquisition cost for us. So we think that there is a good opportunity for us to really sort of develop this business. But again, think of it as like a mini Amazon ecosystem, right.

09:35 You have somebody like almost like a Prime in the sense that they're buying goods on e-commerce, they're watching video. So in our case, it's really a factor of three, you have the subscriber business, which is just subscribing to our television platform. Number two is the ad business, and this will be sort of that third adjacency, which we think really complements the product and allows us to further differentiate from their competitive set.

Bryan Kraft

10:02 Could you put any more numbers around how you expect it to translate into higher ARPU and revenue profit over time or?

David Gandler

10:10 So I believe, we've already announced that we're planning an Investor Day, sometime, call it, mid-year this year. I would say that it will not be as large as the advertising opportunity, but certainly, it will add to the profitability of the overall business.

Bryan Kraft

10:35 Okay. That’s all sure. What do you say in terms of engagement among your subscribers and how does that trended over?

David Gandler

10:39 Yeah. So engagement obviously at peak COVID, we were seeing something like a 146 hours per customer. If you think about Netflix has being the gold standard. I think, Netflix is in the 45 to 50 hours a month range so just goes to show you how important live TV is. And again this is not on a base of 50,000 customers we’re talking 1 million, but obviously, with the war people watching more news, we're seeing the trend to be around 130. So relative to 2019, even 2020 hours are certainly up.

Bryan Kraft

11:16 Okay. How about churn? Can you give us a rough sense of where your churn rate is? How difference – difference among cohorts?

David Gandler

11:23 We're very happy with our churn numbers. So from a retention perspective, retention improved, well, it's been improving every quarter. I think now for 11 straight quarters. But fourth quarter, I think retention improved by about 296 basis points, more impressive than that when you look at month six retention. We've seen a significant lift in the decay curve, upwards of 650 basis points. So again, but that talks to product improvements, platform proliferation, content optimization and really starting to develop a brand around sports.

Bryan Kraft

12:08 How do you envision handling price increases in the future. Are they likely to come annual events in order to keep up with programing cost increases? Or you going to try to maybe stagger those a bit more?

David Gandler

12:18 So I mean, some of you may know, and we started this business recently in 2015 where the service was only $6.99, fast forward 6 years -- 6.5 years later and it's at the base of $65. So I think we have done a good job understanding our customer base, raising prices. At the same time, lowering churn, increasing subscribers. This year, we did not raise. We usually do an annual price increase. I think this September, I believe we have not, but obviously that's something that we optimize based on data that's coming in, but obviously, there will be price increases.

Bryan Kraft

13:07 Okay. Can you talk about the advertising side of the business a bit at ARPU grew 18% last year, so part of that was political but still quite strong? What's driving the growth? Is it price volume, improvements in the way you're targeting or moving ad inventory? Is it adding new advertisers and maybe talk about where you think that ARPU can go over time for advertisers?

David Gandler

13:29 Yeah. So advertiser -- advertising is a key component of our business. It is the profit driver of Fubo. I think it's all the above. We have been growing our ad business by about ARPU from a revenue perspective about 90% to 100% year-over-year. And if you think about the cost of sale on that, it's probably about 2.5% so highly profitable business for us. Right now, our CPMs are in the $21 range. So CPMs up about 4% year-over-year. There is significant room to grow that. As we look at custom segments and we're starting to build out ad tech. This has not been an area of focus for us. Because we are so focused on building a product and the people like, but now it is. And so there is an opportunity for us to focus on CPM growth fill rates and obviously, just as you scale there is step function in being able to charge.

14:38 But just to give you guys an idea, if you look at broadcast rates on a DMA basis for NFL, those rates, Miami, I've seen rates of $110, New York $70, San Francisco, Boston $90. Again, I'm not saying, those are the rates, but we're at a $21 average CPM. So somewhere between $21 then $100 is where we're going to land. And you can kind of build your models out how you wish. But my sense is that long term ARPU still looks to be $15 to $20. Now if you look at and again, I don't know if this is still the case, but the last time I looked at Comcast business, which is a traditional pay TV platform. I think they’re averaging about $10 of ARPU per customer. So with addressability, with targeting, with our ability to, and by the way, gaming plays into that because there is a KYC process that you have to go through. So we're going to have a really robust set of data that we can couple with custom segments that are brought to us by our advertisers.

16:00 So that to me is really compelling and when you think about the average customer demographically, you're talking about, we are skewing heavily male. And even in the virtual space where you see a lot of customers are much younger. We actually skew younger than any of the virtual MVPDs roughly around 42 years of age. So if you think about the highly coveted male 18 to 49 that's sort of our sweet spot.

Bryan Kraft

16:29 Interesting. Okay. Are there other significant innovations on the product roadmap that you think could help to differentiate fuboTV and can you talk about those?

David Gandler

16:37 Yeah. I mean we have really focused on product. We've added a FanView. so first, we started with Multiview. We've added FanView which allows you to squeeze the video, put an L bar up, it shows you data for players, games. You can see, there's all kinds of data that we're working on, we've acquired a company called Edisn.ai, out of India that specializes in computer vision, which is really foundational technology to allow on a -- at a frame rate level to understand what's happening on screen. So -- and that's going to lead to things like having timelines, being able to create personalized highlight reels. So we're well on our way to doing that.

17:25 I think the most recent rollout is going to be a [indiscernible] game that is free. Again, we want to do a few things that we want to identify, who will play. So that we can target them later for our gaming product, but it's also to gamified experience, right and create that differentiation. This is an area that we're focused on, I think if you look at the competitive set, they're really interested in selling the video, getting the fee and selling some ads and we're trying to take it well beyond that.

Bryan Kraft

17:54 Okay. The barriers on your stock argue that pressure from content cost inflation combined with broader pay-TV industry sub declines are going to limit the opportunity for your company. What do you say in response to that and what do you think that they are missing?

David Gandler

18:13 In my opinion they’re missing a lot, probably everything.

Bryan Kraft

18:15 Why you might say that?

David Gandler

18:16 Yeah, but that's my view. Look, content costs, the increase in content or the rising costs are not specific to Fubo.

Bryan Kraft

18:28 All right.

David Gandler

18:28 They’re rising for everybody, including ESPN, right. So what I would say is that 96% of our audience watches sports. Now that to me is probably the most important factor because that means, we can amortize the cost of sports across our whole base. Problem with traditional cable is that most people don't care about regional sports. They don't care about ESPN and so every time, the price goes up, they say well, why am I doing this, all I care about is news or TV series or movies, so very different for us. And our base -- because their sports fans actually prefer more sports.

19:16 And again, the proof is in the pudding. We've continue to add more regional sports networks, which are expensive and whereas YouTube and Hulu and others have backed away. Now, you made a remark around Diamond Sports. And as I’ll say, we have conversations with everyone. They’re always ongoing, but at our scale, we feel that it's time to get some leverage. And so we'll continue to have those conversations and when they're ready and we believe it's the right time. We'll be more than happy to help them.

Bryan Kraft

19:51 I don't know, if you know the answer to this off the top of your head. But you mentioned that you collect billions of data points per month?

David Gandler

19:58 Yeah.

Bryan Kraft

19:58 What -- how many sports on average or on a median basis does your average customer watch, I mean different sports?

David Gandler

20:08 Yeah. So I can tell you the average customer watches about 114 programs per month. Within that, I would say, 50% -- sorry, that was at the peak football season. I would say about 40% of viewership time that's total time viewed on the platform is dedicated to sports. Okay. With about 20% to 22% news and the rest is entertainment. Now the entertainment piece is important because if you watch football on Sunday’s, we need to keep you engaged on the platform. So the entertainment piece actually plays a very important role, also this is a family product. So we want -- the sports fan is important because they're the person in their household that's driving the decision making process as to what to get. But as they sell the product into the household, they have to say, well, they have news for you. And you've got, Bravo for this person in the household and they've got some kids programing. So it's a family product. But I would say, sports is about 40%.

Bryan Kraft

21:19 Okay. Great. You recently acquired Molotov, France’s number one live streaming platform. You've made pushes in Spain and Canada. Can you tell us more about your international ambitions and the growth opportunity that you see there? And maybe within that talk about your timeline for further international expansion and what gives you confidence, you can be successful outside the U.S.?

David Gandler

21:43 So first, I just want to be clear, we are not focused on international expansion today. We've got inorganic opportunity in the United States and we acquired Molotov for several reasons. In short, I would say, it's team, technology and operating model. Those are the three things. Now, one is, as you know, it's very difficult to hire engineers today. And Fubo for a company that is guiding towards 1 billion, roughly $1 billion of revenue this year. We have only 530 employees. So if you look at comps of Roku, Netflix, Spotify, DraftKings those companies approaching $1 billion had between 153,000 (ph) employees. So this for us was an opportunity to pick up a team that was already built, working on a very similar product, a live TV streaming platform. They've focused on areas of technology that we just haven't gotten to yet, specifically around metadata few other areas.

22:54 And number three, because we are the same operating model, the integration process was relatively seamless. In fact, we've pretty much integrated the team into our U.S. business. So the idea of a Molotov is really to help us continue to grow that business, but it's a brand that as you said is a number one live streaming platform in France. And again, we did about -- for 2021, I think we streamed 1.2 billion hours, and Molotov streamed 800 million in France. So I think 2 billion hours streamed as just more leverage, right. We have cloud computing leverage, CDN leverage, another third-party services that we obviously you can really bring down the costs. So and then we will help them with ad tech and certain things like that.

23:50 So from my perspective, again, we're focused on the U.S., but if you think five, seven, nine years out, we're in Canada, we've just launched. We've acquired the EPL rights in Canada, so be a lot of testing there, but these markets actually have pretty strong gross margin profiles just on the subscription side. And the ad businesses in Europe are really nascent as well. So there is a huge opportunity there long-term to build a global business. And the reason why, again I say long term, not a focus for the next couple of years. But the reality is, you have a 1 billion pay-TV customers and right in the world. And when I look at the competitive set, it can only be an American company that is going to become a global leader.

24:40 And again, you guys know who are the competitors are again Sling, Hulu Live, YouTube TV and DIRECTV. None of those, if you think about DIRECTV, they've been selling assets internationally, so it's certainly not a focus for them. Not a focus for DISH either with their mobile ambitions. YouTube has already said, this is not a product that they want to launch internationally. So we think that we would have the edge, particularly given the fact that we're scaling out our tech platform. So again, a lot of organic opportunities here in the U.S., but internationally, of course, we have to keep one eye on a 10-year plan as well.

Bryan Kraft

25:24 How do you think about profitability going forward, obviously, you look to drive subscriber growth efficiently. Is there a certain subscriber level that you need to reach in order to hit that breakeven point? And can you talk lifetime value versus CAC?

David Gandler

25:43 Yeah. So we have to be very careful, there is a fine line where you still need growth because growth allows you -- subscriber growth provides the leverage. And when we look at the most recent content deals that we've signed. We've seen -- let's just leave it ads very positive results from those deals. So you still need to grow to be able to drive down costs and improve the operating leverage across the business, which we've done for most segments other than content. But when I look at Sling, I think Charlie Ergen said that Sling by itself is already profitable. So without giving away much and we will have an Investor Day sometime as I said mid-year and our CFO, and the rest of our team will kind of guide investors through that.

26:42 We're continuing to expand our contribution margin. Ads is going to be and is a big focus for the company, which is growing at about 100% year-over-year. So if you think about this past year, we did about was about $75 million to $78 million of revenue, as I said about 2% of that is the cost of sale, so it's all margin. So if you think about where the business is going and the guidance in terms of subs there is a pretty meaningful business there. So when you couple advertising with the opportunity around wagering you could see where you start to see a pretty robust margin opportunity across our business. But in terms of LTV to CAC again that's something we'll provide sometime mid-year.

Bryan Kraft

27:34 Okay. What are the types of acquisitions you might -- you be interested in whether it's in sports betting or ad tech or content? Where your interest is?

David Gandler

27:43. Yes. So we -- we'll obviously continue to look at companies we feel might be interesting, but the reality is, we've acquired two companies that we think are going to create a lot of value for us from a foundational technology perspective and team perspective. I don't see anything that we actually need today. Obviously, the stock price doesn't allow us to do a lot. But again, we'll continue to be opportunistic. But again, I don't see anything on the horizon that would be extremely important for us to acquire.

Bryan Kraft

28:19 Maybe just a question on political. We've got an election coming up this fall. How have you done in past political cycles, and how does that -- are there new opportunities or do you think you'll be able to take advantage of it at a new level with this cycle just as you've grown as a company and above of capabilities?

David Gandler

28:40 Yeah. Well, last year I think we did fairly well, if I recall. This year I would say we'll probably do a lot better. And the reason is because as we start to build out addressable, the targeting again, not for political because that you can't really target, but because of the targeting for all the other advertisers is pushing naturally the rates higher. So during political people are going to have to pay the rate and it's going to be pretty significant. So there'll be bidding on users or consumers with natural floor set by other advertisers. So we think that that's going to be a huge opportunity. Our ad tech platform is not as strong as we would like it to be, obviously, we're still building that out. But as we develop our header bidding solutions, we think that will take advantage of political.

Bryan Kraft

29:34 Okay. Great. And then I just wanted to follow up on, one of your earlier comments on the sports betting side. You had talked about basically sports betting revenue being very high margin and really need that many subscribers in order to scale it properly. What about the fixed costs in that business? Are they just not that significant or?

David Gandler

29:54 Well, the thing is that, there is a lot of services out there that provide the back end solution, so it's not that expensive. The heaviest cost in betting is the actual marketing. All right. You guys, I think everyone knows what the marketing costs and how the type of headwind that creates. So if you take that cost out, it's not really that expensive. And Fubo is not -- on the video side, we're not known for promoting and we're providing lots of promotional pricing. So I can see a world where we don't provide a lot of promotional pricing and the value is in the experience itself.

30:35 And so, one thing is to take advantage of the subscriber base that we have, with the other thing that people sometimes forget. So we have a significant number of trials coming in over the course of the year. So I'm just theoretically putting numbers out. Let's say you had 2 million trials over the course of the year. You guys can do the math. What would it cost for a Sportsbook to get to 2 million trials? Just do that math, alone. It's scary.

Bryan Kraft

31:08 $500 million or something.

David Gandler

31:10 There you go. So it's hundreds and hundreds of millions of dollars. So while we get zero credit for gaming today or negative credit as some will say. The opportunity is massive. We have 10 market access licenses and I think investors may worry but you're late to the game. I think we've proven in the video business. I remember, we had about 80,000 to 100,000 customers when Sling had 2 million, and Hulu 2 million to 3 million, and YouTube had $1 million and the question was, okay, guys, what are you going to do now if you have hundred thousand everyone's in the millions. In the fast-forward three years, we're at 1.1 million. So I think that we're not late to the game and nobody has unlocked casual gaming.

32:05 So when I think about casual gaming, it's not about efficient lines or it's really about I'm watching this programing, when we personalized highlights and do all these things, we’re going to know so much about you, that if we know your favorite soccer player is Messi or your favorite basketball players LeBron James. We'll be able to tell you things about what's happening on the platform and really create discrete experiences that nobody else can do. And so as long as we're continuing to grow our sub base, then we'll be able to take advantage of the gaming opportunity, but CAC I think is the probably the greatest headwind gaming.

Bryan Kraft

32:44 Interesting. And maybe before we wrap up one more question. I think that recently you've introduced contracts into your promotional mix. Can you maybe just talk –

David Gandler

32:56 You are talking about the three month?

Bryan Kraft

32:57 Yeah. Maybe contracts, not the right word, three-month commitments. Talk about maybe why you did that and how that's working for you?

David Gandler

33:05 So the bear cases, we’re in floating. That's the bear case. The reality is, we're testing and so, we're in a business of acquiring and attracting high quality customers. And so we thought why not try something we've never thought of, which is a multi-month subscription contract, if you will on a game like the Super Bowl, where you should expect a high level of churn. So those who follow our story closely, you will note that we don't market things like The Olympics or March Madness, because those are high churn events. So we just wanted to see what the math it looks like, what consumer perception might be, if we do something like the three-month contract. And so the data is the data and we'll continue to experiment and you should expect more experimentation from us in many different areas.

Bryan Kraft

34:12 Okay. All right. Great. I want to wrap up, thanks, David. Appreciate you are coming and interesting discussion.

David Gandler

34:18 Yeah. Thank you very much.

Question-and-Answer Session

Q -