Sports-oriented video-streaming specialist fuboTV (FUBO -1.50%) delivered an analyst-stumping earnings report on Tuesday evening. CEO David Gandler also gave investors a candid preview of where the media market is going.
Let's dive in and take a look at this young company's first earnings report since entering the NYSE market in October.
FuboTV's third quarter by the numbers
The company is pulling off some absolutely amazing growth right now. FuboTV's revenues rose 47% year over year (or 71%, if you exclude 2019 revenue from the FaceBank operation that was sold to a group of private investors in July). FuboTV added 169,000 subscribers during the third quarter, amounting to a 58% increase from 286,000 paid subscribers in the second quarter.
The skyrocketing subscriber additions are even more impressive when you consider that fuboTV also raised its prices dramatically in the third quarter. The average revenue per user (ARPU) rose 14% year over year to $67.70 per month, a price boost that accounts for adding Walt Disney (DIS -0.32%) sports station ESPN to its channel lineup.
Going forward, fuboTV plans to supplement its subscription fees and ad sales with a third revenue stream. The company is working up an online sports betting platform that will bring it into a market that should be worth $155 billion in annual revenues four years from now. Since fuboTV's streaming TV channel portfolio is heavily weighted toward live sports, management is wagering that the average subscriber will be interested in laying odds on the content they're watching. The platform would generate additional revenues while inspiring participants to watch more TV. It's certainly an unusual approach to the live TV market.
The details on how the betting will work and when it will be available are still up in the air. Stay tuned for further updates.
COVID-19 only sped things up a bit
On the earnings call, fuboTV CEO David Gandler noted that the COVID-19 pandemic merely accelerated his company's growth in the third quarter. Industry changes were already underway when the pandemic struck.
"Look, at the end of the day, COVID really just accelerated what's been happening prior to this," Gandler said. "There's been a shift of TV ad dollars to connected devices well before COVID. We're starting to see the impact of that on a normalized basis in the sense that it really hasn't impacted our business in Q3."
This clear-eyed outlook is in line with earlier market commentary from sector peers Roku (ROKU 2.19%) and Netflix (NFLX 1.56%), among others.
"What we're seeing is a trend toward streaming that's been building for years now," said Roku CEO Anthony Wood in last week's third-quarter earnings call. "I think the pandemic certainly helped accelerate that trend and maybe tipped over some things a little bit, but it's a trend that was happening anyway and will continue to happen for some time because everyone doesn't stream yet."
Netflix co-CEO Ted Sarandos shared a similar message in his company's third-quarter call two weeks earlier.
"I think there was kind of a natural migration that was already happening, that this may have accelerated in some dimensions," Sarandos said. "I wouldn't look at this being that radical a change. I just think it's probably an accelerated change that may have already been in the works."
What's next for fuboTV?
I think it's pretty obvious that Gandler and his counterparts at Netflix and Roku are correct. The cord-cutting market trend in the entertainment industry has been going on for years. The global health crisis provided a large bucket of additional fuel for that fire, speeding up the shift toward digital media streams. These companies saw the digital shift coming many years ago and have been working toward grabbing significant shares of the explosive video-streaming market.
Luck favors the prepared, and that old proverb applies to fuboTV's fantastic third-quarter report as well. This seemingly overnight success was built on five years of marketing and product development, with a dash of coronavirus accelerant just as fuboTV joined the public stock market.
Let's see how much Gandler and his executive team have learned from the proven success stories of Netflix, Roku, and Disney+. Much can go wrong, and fuboTV is still a very small player in the streaming media market, but the company has an opportunity to stand on the shoulders of giants. I'll keep a close eye on this up-and-coming digital media expert.