FuboTV lost 11% of its subscribers in Q1 2023 but expects to make them all back and some by the end of the year. As the industry moves everything to the cloud, fuboTV is doing the reverse to save money and boost quality!
Why it matters
FuboTV has been able to charge more than most vMVPDs for its service because of its sharp focus on sports and quality. However, the steep subscription fee increase in Q1 suggests there are bounds to how much premium people will pay.
The move away from the cloud to on-premises implementations flies in the face of the broad industry trend toward the cloud. The claim that it will save the company money is what moving to the cloud is generally considered to do.
FuboTV drops NA subs in Q1
FuboTV lost 160,000 subscribers in the first quarter of 2023. It finished the quarter with 1.285 million subscribers, down by 11% over Q4 2022 but up by 22% over Q1 2022. The company expects to perform about the same in the second quarter, forecasting a loss of 12%. However, it expects to be up by 20% by the end of the year. Despite the losses, fubo raised guidance on where it thinks subscribers will be at the end of the year, to between 1.55 and 1.57 million subscribers.
The biggest factor impacting subscriptions was likely the big increase in subscription fees instituted in the first quarter. The company raised the cost of the base package by $5 a month to $74.99 monthly. However, it also added a mandatory RSN (regional sports network) fee of $11 to $15 monthly. The RSN fee meant that virtually all subscribers saw the cost of fuboTV rise between $16 and $21 monthly, a 23% increase.
To hear Mr. Gandler’s explanation of the price increases, listen to the Inside the Stream interview with him from earlier this year.
Surprisingly, David Gandler, fubo’s CEO, thought that two other factors drove the subscriber decrease:
“But I think the two cohorts that we were most concerned about that we mentioned on the last call was the World Cup cohort and the NFL cohort, which typically we would have expected them to turn off significantly at greater pace.”
The NFL completed its season in the first quarter, so, understandably, some football fans might cancel. However, it is a little more difficult to understand how World Cup fans could negatively impact Q1 since the tournament ended in Q3 2022. That said, the company expects price increases to drag subscribers down in the second quarter, resulting in the slowest annual subscriber growth in the company’s history for the full year.
Bucking the cloudification trend
One of the biggest trends at NAB 2023 was that just about everything that can be moved to the cloud is moving to the cloud. Media companies are slimming down or eliminating their production, distribution, and storage infrastructure and replacing it with cloud-resident SaaS implementations. The drive behind the switch is the enormous savings in capital and operational costs that companies can realize, coupled with the flexibility of a software-based implementation.
According to Mr. Gandler, fubo is headed in the opposite direction:
“And then one of the other pieces we’re working on in the short-term is our on-prem data center where we’re moving all of our video processing from the cloud to our own data center, and that’s going to happen in Q2.”
Mr. Gandler cites two reasons for the move away from the cloud. Firstly, he believes it will save money over the next few years, not increase costs. Secondly, he says it will result in better video quality for viewers. Quality has become a hallmark of the fuboTV service since it became the first vMVPD to offer 4K streaming. But one of the challenges with 4K streaming is keeping latency low: the lower the latency, the lower the quality. He believes fubo can do a better job with quality by bringing video distribution in-house:
“Think of this as our ability to have greater control over our video quality, potentially latency, just as well as just a higher fidelity product.”
There was another reason, though Mr. Gandler didn’t explicitly state it. He has big plans for the advanced DVR provided with the service, including AI-generated game capsules and personalized game highlights. He appears to believe that having full control of the technology platform will make it easier for his technical team to make these and other improvements.
