FuboTV and the challenges of sports streaming

Getting a streaming business up and running is not a straightforward exercise. Making it pay is vastly more challenging. But making a go of a premium sports streaming business is perhaps the most obstacle-strewn path of all.

Huge question marks remain over the viability of sports-themed streaming. The reluctance of Netflix to involve itself in sports is well documented. Co-CEO Ted Sarandos reiterated during the company’s most recent earnings call that that “we haven’t been able to figure out how to deliver profit in renting big league sports in our subscription model”.

US-based sports-themed streamer FuboTV this week posted its latest financial results, and despite elements of these being broadly quite impressive, doubts remain about the long-term viability of Fubo and other sports streamers.

First, the impressive part. The streamer passed the revenue milestone of US$1 billion for the first time. The company exceeded the mid-point of the Q4 subscriber growth expectations by 80,000 and revenue guidance by US$32 million. Q4 EBITDA also improved and the company reaffirmed its commitment to achive positive cash flow in 2025. For the full year in North America, Fubo took US$984 million in total revenue, up 55% year-over-year, including $100 million in advertising revenue.

The streamer ended the year with 1.445 million subscribers in North America, up 29%, and 420,000 in the Rest of the World (most notably Molotov in France), up 117%.

The company is also building its advertising business and expanding into FAST, where it now operates over 80 channels.

“Our record performance in the quarter and throughout 2022 reaffirms our unique value proposition and our long-standing thesis that an aggregated offering with multiple monetization levers remains the most attractive live TV option for consumers and media partners,” FuboTV said in its letter to shareholders.

So far so good. But what comes next?

For 2023 FuboTV is expecting very modest uplift in subscriber numbers of around 5%. The main reason is a big hike in prices introduced in the first quarter of this year. The cost of the service to US consumers taking the recently acquired Bally’s regional sports networks in its base plan went up by a whopping US$14-US$16.

Fubo’s motivation for this price increase was to focus on reducing its losses and getting closer to the elusive goal of profitability. The company had earlier abandoned plans to develop a betting offering, previously seen as a key element in its long-term strategy.

The emphasis on profits rather than growth makes sense when you looking at the widening losses posted by the company.

In 2022 Fubo turned in a net loss of US$561.9 million, and an EBITDA loss of US$323 million, as it continued to burn cash to finance its operations.

However, this emphasis on profits would seem to make more strategic sense if FuboTV was at a more mature stage of development. Streamers are expected to rack up losses as they focus on gaining market share and scale. FuboTV is hardly at that point yet.

But it is burning through a lot of cash. The company’s losses widened last year as it spends massively on the rights needed to fuel subscriber growth. But instead is banking on revenue growth from existing subs it hopes will stay with the streamer while paying higher fees. On the company’s earnings call co-founder and CEO David Gandler said Fubo was spending around US$900 million a year on content, which is pretty close to its total revenue line for the year. Gandler intimated that he expected some improvement as deals came to and end this year.

Posting its full-year numbers, Fubo also announced its latest share issue, which will dilute the value of stock that has fallen hugely in value.

As a standalone sports streamer, FuboTV faces competition from the likes of Alphabet’s YouTube and Amazon – big tech companies with very deep pockets – as well as established media players.

Live-streaming technology is advancing rapidly and has given rise to the view that streaming represents the future of live sports. That may well be the case. For sports rights bodies the added competition is a boon. But building a sports business from scratch remains fraught with difficulty and a lot of risk.