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MediaTalk | Season 2 | Ep. 34 - FuboTV on its fight for the future of sports media

"MediaTalk" is a podcast hosted by S&P Global Market Intelligence wherein the news and research staff take a deep dive into issues facing the evolving media landscape. The weekly podcast includes conversations with internal thought leaders alongside interviews with industry insiders and analysts.

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The sports video market is in the midst of a historic shift. When it comes to local rights, many teams are abandoning regional sports networks in favor of broadcast and streaming offerings. On the national side, more and more rights are migrating to streaming from pay TV. Standing in the middle of it all is fuboTV Inc., the sports-centric virtual multichannel service. Fubo has been making headlines of late with its legal battle against Venu, the proposed sports-oriented streaming joint venture from Walt Disney Co., Fox Corp. and Warner Bros. Discovery Inc. On this episode of MediaTalk, host Mike Reynolds sits down with Fubo co-founder and CEO David Gandler to discuss the evolving sports media landscape and the status of its lawsuit against Venu.

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David Gandler, CEO and co-founder of FuboTV

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An edited transcript follows below.

Mike Reynolds: Hi, I'm Mike Reynolds, a senior reporter covering the media industry with the S&P Global Market Intelligence tech, media and telecom news team. Welcome to MediaTalk, a podcast hosted by S&P Global, wherein the news and research staff explore issues in the ever-evolving media landscape. Today, I'm joined by David Gandler, the co-founder and CEO of Fubo, the streaming aggregator and distributor whose tagline is "the leading sports-first live TV streaming platform."

In North America, the company finished the second quarter with more than 1.4 million paid subscribers and has another 400,000 in France and Spain, and it's continuing on its path to profitability. Fubo has also been making headlines of late with its legal battle against Venu, the sports-oriented streaming JV of the Walt Disney Co., Fox Corp and Warner Bros. Discovery. How are we doing today, David?

David Gandler: Good. Thank you for having me.

Reynolds: Thanks for joining MediaTalk. Let's do it.

As streaming has emerged over the years, viewing has migrated from phones and laptops to the living room or elsewhere in the house. What percentage of Fubo watching takes place on the big screen these days, David?

Gandler: Right now, as a streaming service, 93% of our viewers on Fubo watch on connected devices. That's the main form of viewership on the platform, despite the fact that it's a multi-platform service.

Reynolds: And big-screen viewing is important for brands and their creative messaging, right?

Gandler: Yeah, it's very important. One, if you look at just what iSpot.tv Inc. reports, 62% of ad impressions served on Fubo reached incremental households that are unreachable on linear TV. The second piece is that ads on Fubo outperform the average attention of other ads across cable, CTV, and FAST apps. And that's according to TVision. So, big screen is obviously very important. People are very engaged and immersed into the programming.

Reynolds: All right. Fubo started as a soccer-oriented service, and sports is key, but can you give us a sense, David, of how things break down? Sports is what percentage of viewing and the other genres that you offer comprise x?

Gandler: Yeah, so we break it down into sort of three buckets: one, sports; the second, news; and third, entertainment. Entertainment includes both movies, TV shows, scripted, unscripted, etc. I would say, seasonally adjusted, you're going to see more viewership around sports in the fall, given the amount of sports programming — NFL, college football, etc. But I think on average throughout the year, about 45% to 50% of viewing is sports. The other two, entertainment and news, also comprise about 50%. Within the news and entertainment side, it really depends on the news cycle. If it's a heavy news cycle, you'll see news slightly higher than that, and it can get as high as about 25% to 27%.

Reynolds: Yeah, I would assume that's at this time of year or in this cycle as it goes.

Gandler: That's correct.

Reynolds: All right. From a commercial perspective, you guys have standard 30- and 15-second spots, but Fubo also offers a number of advanced advertising formats.

Gandler: Yeah, we've been pushing in that direction for the last, I would say, 12 to 14 months. We've added interactive ads. We've also released pause ads and enhanced banner units for better targeting. Most recently, I'm not sure if it was in the news, but we've launched this triple play, which was a sponsored carousel brought to you by Walmart Inc. It was a major new piece of real estate that we were offering up, which includes this video carousel that's branded and allows the advertiser to choose the video programming they want that aligns with whatever their message is or whatever target audience it is that they're looking for. They can also seamlessly integrate any video or videos that relate to their brand as it relates to the overall campaign in that video carousel. So we're continuing to innovate on that front. One of the other key elements is that all of these new components will have data-targeting capabilities.

Reynolds: So you have Walmart on board now in that capacity. Are there others waiting to get in line?

Gandler: Yeah, we just started pushing this out. This was not part of the playbook in the past year, so this is a new area, and we've seen how Roku Inc. has taken advantage of display ads, and we've started to push in that direction as well. We are seeing some good traction there.

Reynolds: Good deal. In addition to serving as a content aggregator and distributor, Fubo is in the FAST channel game. I think you guys have a number of these offerings at this point, David.

Gandler: Yeah, I think the key offering is our Fubo Sports Network, which we launched in either 2018 or 2019. It was really about us attempting to deliver a free, ad-supported sports network that has really grown. As of the last quarter, it might have even achieved profitability. Obviously, we don't break that out in earnings because it's still very small. But we've added a lot of MMA and other new sports programming. There's some soccer programming on it as well, and it's one of the top-performing FAST channels from my understanding across a number of key platforms.

Reynolds: So it's not only within Fubo, but other platforms are carrying this service.

Gandler: Yes, I don't want to say it's fully distributed. I don't know where exactly it's on, but obviously it's on the key platforms like Amazon and Roku, the Xumos of the world, and others. We're continuing to look for ways to further distribute that because it is performing well, and we think we can really grow that business nicely.

Reynolds: All right. I think Fubo finished its second quarter with 1.45 million subs in North America. I know you're not reporting Q3 results until next month. Can you give us a sense directionally where things are going? I think, as you alluded to, a lot of viewing is in the fourth quarter with football and baseball playoffs and the like. So I'm assuming the third and fourth quarters are your prime acquisition periods.

Gandler: Yes, that is correct. We typically draw most of our subscribers in Q3 and Q4. There are a few sports that begin, obviously, as I said, the college football season, as well as the NFL. We have all the different soccer leagues that also start in the fall. As you get into October, you start to see a lot of the local regional sports kick in because of the start of the NHL season in October, as well as the NBA. Further from that, you get into late in the year in December, with bowl games and some other key sports events. Yeah, it's a big time for us. We feel pretty good about it. Historically, we've always grown most of our subs in the back half of the year, and I don't suspect that would change in 2024.

Reynolds: Let's turn to the 800-pound gorilla — or is it the 1,200-pound legal gorilla in the room?

Gandler: My favorite topic.

Reynolds: So, as I alluded to earlier, I think Fubo started as a soccer-oriented service in 2015. Then you wanted to branch out to add other sports, but that couldn't happen because of the pay TV industry's long-time bundling practices, where you have to add other networks in order to get maybe the sports — in the case of Disney networks, in order to get the ESPN (US) suite; the Fox channels to get at the broadcast network, FOX Sports 1 (US) and FOX Sports 2 (US), or whether it's Cartoon Network or Cartoon Classic to gain access to TNT (US) and TBS (US). If you could talk about the impact of bundling on Fubo's business and its monthly subscription fees, David?

Gandler: Yeah, the JV is just one example of how we believe these companies have blocked and stolen our playbook, as you said. We started this back in 2015, and we've been blocked at every turn from being able to offer a product we thought would resonate with consumers. Obviously, these three large media companies, which control 65% or more of broadcast programming, decided to launch a similar service. We filed an antitrust lawsuit against Venu Sports. I think that's just one piece of it. The judge, I believe, agreed with us because she granted us the preliminary injunction. I believe she said we would be successful in the merits of our claim, which is why she granted the injunction. So we feel pretty good about our position, but there's a much deeper problem here. I would say that is historical in the sense that sports customers have been forced to pay for unwanted entertainment programming. At the same time, over the years, entertainment customers have been subsidizing all the sports programming. It just isn't fair to consumers. I'm very happy that finally this has come to light, and we were the ones that had to bring this up because we're again at the forefront of this, and we've been attempting to disrupt the pay TV ecosystem for nine years. This is a very important move, but as I said, there are deeper issues here that have really impacted consumer control and negatively impacted consumer discretionary income. The costs of these things have been rising for decades, and it simply isn't fair. I think it's time that we shine a light on it as distributors and consumers.

[Editor's note: After the injunction, Disney, Fox and Warner Bros. Discovery said they respectfully disagree with the court’s ruling and filed an emergency motion asking for an expedited appeal. In the motion, the companies argued Venu would be "an innovative and competitively-priced streaming offering for sports-focused fans that will only add another option to the broad and continuingly growing panoply of offerings that sports and video consumers have to choose from when deciding how to spend their time and money."]

Reynolds: So getting back to Venu a little here. They announced in February. Were you hearing rumblings about this beforehand? You guys, I think, filed your lawsuit within maybe 10 to 14 days after they announced their plans.

Gandler: Yes, we heard about it just like everyone else, and I think we were equally surprised. If I'm not mistaken, the leagues were also surprised. I think the NFL came out and said they weren't aware.

Reynolds: That's right. Yeah. They said they were caught unaware. That's right.

Gandler: Yeah. Again, in my view, my subjective view, I don't think it was an honest way of drip-feeding information out to the market. All of this obviously was very much planned. All three CEOs came out to market during earnings season to announce this. Again, I think it's disingenuous to really talk about a product that's going to be good for consumers when we all know that without any competition in the marketplace prices ultimately go up. There's no reason why consumers shouldn't believe that this would just be a very short-term proposition. After that, they will not be incentivized to keep prices down or improve their products.

Reynolds: So this again, it's been sidelined for now. I think they're mounting another appeal to maybe get another hearing to get Venu launched. The main trial is set for next year sometime, or is there a date in mind?

Gandler: I believe it's Oct. 6, [2025], but if not Oct. 6, I believe it's the first week or early days of October [2025]. I think we're waiting for the appellate court to rule. I think that's going to happen before the end of the year. Depending on the result of that, I think we'll begin to focus on the trial. It's not an easy thing, but we're fighting for choice. Again, our goal is to make sure that the judge sees our points and that our case will be heard.

Reynolds: So you think you guys will prevail in this?

Gandler: I hope we prevail, but as I read the decision that she put forth, a 70-page document, she basically says the only reason she granted the preliminary injunction is because she felt we would be successful on the merits. Otherwise, if she felt we wouldn't have been successful on the merits, I don't think she would have issued that. That gives me comfort, as we're in a decent position. Obviously, things can change. We still have to go through a significant period of discovery on both sides — the defendants and plaintiffs. We'll be looking forward to putting our case in front of the judge again.

[Editor's note: Fox Corp. Executive Chairman and CEO Lachlan Murdoch said in September that he remains optimistic about Venu's ability to reach sports fans outside the traditional pay TV ecosystem. He also said the joint venture is "misunderstood" by those who have not seen or used the product.]

Reynolds: All right. Let's shift gears a little bit toward the local side. Obviously, the regional sports network business is being challenged in many different ways. Fubo, David, along with, I think, DIRECTV Entertainment Holdings LLC, are the only distributors that actually are committed to carrying the RSNs or most of the RSNs. So many different things have happened. The Suns, the Jazz, the Utah Hockey Club, Panthers, Pelicans, Dallas Trailblazers — all others have inked deals of various kinds with broadcast networks and/or broadcast station owners and/or streaming companies. How do you guys make that work? There are just so many. How do you guys stand that way in terms of distributing all of the newcomers or the new kinds of businesses as they are?

Gandler: Yeah, one is you have to stay abreast of everything going on daily. You can't look at this stuff weekly because, as you said, there are so many changes going on in teams taking their rights back and attempting to either grow their audience or grow their revenue or both. If I'm not mistaken, we carry over 35 regional sports networks today, plus direct deals. I think one of the first deals, if I'm not mistaken, was seeing the San Diego Padres that were dropped. I think that was the first team that was dropped by Bally's. Quickly, we were able to work with Major League Baseball to get that — I don't want to call it an RSN, but that team's games up and running in San Diego without missing a game. We're very focused on ensuring that we continue to provide our consumers with all the programming that they're looking for. Obviously, local sports is very important; some of the most avid fans are local sports fans. That makes sense because they want to get their 80-plus games that they can watch on their local station. I say station because some of these deals have gone over to local broadcast. I'll say they're either regional sports networks, local stations, or some kind of direct-to-consumer service. What we've learned and what we know being in the business for 10 years is that this is not an easy thing to do, to run a direct-to-consumer service in a small DMA. The economics are extremely challenged. We'll do our best to continue to work with these teams and offer them opportunities to drive revenue and viewership.

 

Reynolds: Again, in the sense that you mentioned the Padres, the Diamondbacks, and the Rockies are also, for lack of better terms, under Major League Baseball's purview and working with local distributors and I guess with you guys. Coming out of the Diamond Sports Group LLC bankruptcy last week, I guess Diamond is looking to drop all of its baseball relationships minus the Braves. Are you guys in a position to do that? Can you cover all those teams? Do you want to cover all those teams, your relationship with baseball? Because obviously, when you get into the local programming, that's the most inventory of all the games.

Gandler: Yeah, look, of course we want to carry all the teams. Again, our job is to aggregate as much programming as we can. We're also a leading partner, I would say, with Major League Baseball. In terms of coverage, we have local team networks. We deliver Major League Baseball Network (MLBN). We deliver StrikeZone, MLB TV, and obviously baseball through all the national nets like ESPN and FOX. We've been a long-time partner of the league. We'd like to continue to be that partner, and every time there's some kind of issue or they need assistance, we are very quick to react. In the Padres case, we were able to be a good partner for them. We enjoy working with baseball, and we're very happy about the coverage and the improvements in some of the league rules, which have led to improving viewership numbers and better engagement. So, we're excited to continue partnering with MLB.

Reynolds: In a way of wrapping up here, David, I've been covering this for many moons. You are obviously in the middle of it. The sports landscape is ever-evolving, changing, and exciting. What's an overall assessment of where things stand?

Gandler: Yeah, look, I think that it's very quickly evolving. I think that the media companies over the last 15 years have had a negative impact on the industry. It's not that people don't like cable or they don't like one bill and having all of their programming in one place. Given everything that's been happening, it's become very difficult to monetize programming. The pay TV ecosystem has been an extremely profitable business for all participants — for the distributors, for all the network groups, for the sports leagues, right? For decades, and the consumer basically enjoyed it. If they wanted to watch a sporting event and they turned on Fox and it wasn't there, they would switch to ESPN without any frustration. Now, you're dealing with a lot of fragmentation, and because of that fragmentation, even with college football this year, I think people probably have not watched as much college football early on only because they're still confused as to what games are where and which leagues. I think that has had some impact on viewership, at least in the first month. But all in, I would say that you're going to see a lot of this evolution going forward. My belief is, and I said this back in 2020, that we're going from bundling to unbundling to rebundling. I think I've been saying that for many years since 2020. My sense is the best user experience is going to be one where people can get niche sports, the top premiums or broadcast sports, everything in one place because it's just easier. You have better personalization, better use of targeting, better use of artificial intelligence, everything to really improve that user experience. My bet is that ultimately, we'll be in a place where distribution still remains a core way of getting content to consumers.

Reynolds: All right, that concludes this episode of MediaTalk. I wanted to thank our guest David Gandler for bringing us up to speed on Fubo's progress. Thank you, David. Appreciate it.

Gandler: Yep, thank you so much.

Reynolds: This is Mike Reynolds, and thanks to all of you for listening. We'll catch up soon on the next edition of MediaTalk.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.