fuboTV (FUBO +0.00%) is having a challenging year in 2021. The company is growing customers and revenue rapidly, but its stock price is down 40% year to date. fuboTV had an easier time at the pandemic onset when millions of folks were cooped up at home looking for ways to entertain themselves.
As economies reopen, fuboTV has to work harder and spend more to attract and retain customers. Those costs are adding up, and they concern investors who think the company will have difficulty becoming profitable. With 2021 coming to an end, could fuboTV fare better in the coming year?
fuboTV's stock is down 40% year to date. Image source: Getty Images.
fuboTV is making progress on a massive opportunity
fuboTV is a sports-centric alternative to cable TV. It's focused on attracting customers who prefer the bundled cable offering, delivered through a streaming connection. Depending on where a consumer is located, fuboTV may cost less than a cable subscription. fuboTV is undoubtedly a more convenient option. Folks who sign up to cable typically have to sign long-term contracts. Further, before you can start watching TV, the cable company has to send a professional installer to your home.
It's no surprise, then, that millions of folks are switching from cable TV to streaming services. fuboTV is benefiting from that tailwind. In its most recent quarter, ended Sept. 30, it had 945,000 paying subscribers, up by 108% from the same time last year.
Management sees a massive opportunity ahead to capture disenchanted cable customers and bring them to fuboTV. It highlighted that there are an estimated 72.6 million subscribers still active on traditional pay TV.
The rapid increase in new customers boosted fuboTV's revenue to $156.7 million in the third quarter. That's 157% higher than the same period last year. All that is great, but troubling fuboTV are the losses on the bottom line. In Q3, fuboTV generated a net loss of $105 million, an improvement from the previous year's loss of $274 million, but a considerable loss nonetheless.
Demonstrating economies of scale will be critical for fuboTV in 2022
The bulk of fuboTV's expenses is content related. fuboTV offers a selection of channels for viewers to watch as part of their subscription. However, fuboTV does not own that content, so it has to pay the owners for the privilege to offer the channels to customers. For instance, fuboTV has to pay The Walt Disney Company to offer ESPN to customers who sign up at fuboTV.
Those subscriber-related expenses were 91.5% of overall costs in its most recent quarter. However, looking back over the last three years, fuboTV is showing it can leverage those costs across a more extensive subscriber base. In Q3 2020, subscriber-related expenses were 100% of the total, and in Q3 2019, they were 122%.
If fuboTV's stock is to recover in 2022, it has to sustain and probably increase the rate of improvement on that front.
