FuboTV Inc. 10-K

Item 1. Business. Our Mission Our mission is to build the world’s leading global live TV streaming platform with the greatest breadth of premium content, interactivity and integrated wagering. Overview We are a sports-first, live TV streaming company, offering subscribers access to tens of thousands of live sporting events annually as well as leading news and entertainment content. Our platform, fuboTV, allows customers to access content through streaming devices and on SmartTVs, mobile phones, tablets, and computers. Live TV streaming has disrupted the traditional pay TV model (linear video received through cable or satellite providers for a paid subscription), which we refer to as “Pay TV.” This disruption has shifted billions of dollars in subscription and advertising revenue to streaming platforms. The number of cable TV cord-cutting households (those that terminate their cable or satellite subscription) and cable TV cord-never households (those that have never subscribed to traditional cable or satellite) continues to accelerate in the United States, as cable and satellite subscribers increasingly favor the streaming experience. As consumers continue to spend more time streaming content, we also believe that advertisers will allocate more dollars away from traditional linear TV advertising spend and towards streaming services. Yet, despite being a growing share of TV consumption, streaming is still in the early stages of adoption. We believe this creates a significant opportunity for us to capitalize on the cord-cutting movement. We offer subscribers a live TV streaming service with the option to purchase incremental features available for purchase that include additional content or enhanced functionality (“Attachments”) best suited to their preferences. Our base plan includes a broad mix of channels, including top 50 Nielsen-ranked networks, across sports, news, and entertainment. At the core of our offering are our proprietary technology platform, purpose-built for live TV and sports viewership, and our first-party data. Our proprietary technology stack has enabled us to regularly offer new features and functionality. Unlike other popular Video-on-Demand-only (“VOD”) streaming services, live TV streaming requires sophisticated infrastructure and technology, given the nuances associated with an offering of live programming that refreshes regularly. Today, our proprietary video delivery platform supports all major sports leagues and entertainment content owner delivery requirements. We offer multi-view on Apple TV, which enables subscribers to watch four live streams simultaneously. Our technology enables us to meet blackout and geographical rights requirements with zip-code-level fidelity and deliver conforming streams on a per-user, per-device basis, protected by industry-standard Digital Rights Management (“DRM”) technology. We leverage our data throughout our organization to make data driven decisions on what content we acquire for our subscribers to influence product design and strategy, to drive subscriber engagement, and to enhance the capabilities and performance of our advertising platform for our advertising partners. As a result of our direct-to-consumer model, we gain further insight into customer behavior from the billions of data points captured by our platform each month. This data drives our continued innovation and is at the core of our enhanced user experience, product and content strategy, and advertising differentiation. The data also enables us to provide users with real-time personalized discovery of live and on-demand programming and to surface relevant content for our users. Our growth strategy is to acquire subscribers who are attracted to our sports offering and can find with us a compelling sport, news, and entertainment viewing alternative to a traditional Pay TV service. We actively engage those subscribers by providing a seamless Pay TV replacement through a personalized easy-to-use streaming product at a significantly lower cost than traditional Pay TV providers. We then monetize our audience through subscription fees and our digital advertising offering. In 2021, the majority of our revenue was generated from the sale of subscription services and the sale of advertisements in the United States, though the Company has started to expand into international markets, with operations in Canada, Spain and France. 6 We are continuing to invest to accelerate our expansion into the sports wagering space, which we believe will be a complementary revenue stream to our current business model. In February 2021, we completed the acquisition of Vigtory, Inc. (“Vigtory”), which was renamed fubo Gaming Inc. (“fubo Gaming”), augmenting our video technology platform with Vigtory’s sportsbook capabilities and pipeline of market access agreements. Throughout 2021, we introduced our intended online wagering strategy, including the roll-out in the third quarter of 2021 of predictive, free-to-play games, which are integrated into select sports content on our TV streaming platform, and the launch in the fourth quarter of 2021 of fubo Gaming’s business-to-consumer online mobile sportsbook (“Fubo Sportsbook”) in Iowa and Arizona. We are planning to launch Fubo Sportsbook in additional states during 2022, subject to obtaining requisite regulatory approvals. Fubo Sportsbook is purpose-built to integrate with fuboTV, creating a personalized omniscreen experience that turns passive viewers into active and engaged participants. Consistent with our focus on interactivity, we completed the acquisition of Edisn Inc. (“Edisn”), an AI-powered computer vision platform with patent-pending video recognition technologies based in Bangalore, India, in December 2021. With Edisn, we expect to expand our data science and engineering organization globally, while strengthening our technology capabilities and accelerating innovation. Additionally, we further expanded internationally in 2021 through our acquisition of Molotov SAS (“Molotov”) a video streaming platform based in Paris, France. With Molotov, we are augmenting our technology capabilities, enabling us to launch our interactive sports and entertainment streaming platform more efficiently on a global scale. Industry Overview Streaming services have experienced rapid growth in adoption as consumers engage with streaming video and audio through a variety of devices, including connected TVs, mobile phones, and tablets. Traditional live TV accounts for the majority of TV viewing hours for U.S. households, however, the proportion is declining as customers continue cutting the cord. We believe consumers are increasingly favoring the superior customer experience, lower cost, and better value of streaming services. Sports and news content have been a key driver for pay TV operators to retain and grow audiences. Most streaming subscription services have primarily focused on entertainment content offerings, requiring sports fans to, until recently, remain tethered to the pay TV ecosystem. This positions our offering well to provide a pay TV replacement service via streaming that also features an enhanced live sports and news viewing experience. Our Business Model Our business model is “come for the sports, stay for the entertainment.” This consists of leveraging sporting events to acquire subscribers at lower acquisition costs, given the built-in demand for sports. We then leverage our technology and data to drive higher engagement and induce retentive behaviors such as favoriting channels, recording shows, and increasing discovery through our proprietary machine learning recommendations engine. Next, we look to monetize our growing base of highly engaged subscribers by driving higher average revenue per user (“ARPU”). We believe our expansion into wagering and interactivity is core to this model. We believe free-to-play predictive games enhance the sports streaming experience - while also providing a bridge between video and our sportsbook. We expect the integration of gaming with our expansive live sports coverage will create a flywheel that lifts engagement and retention, expands advertising revenue through increased viewership, and creates additional opportunities for Attachment sales. We drive our business model with three core strategies: ● Grow our paid subscriber base ● Optimize engagement and retention ● Increase monetization Our Offerings Our offerings address the needs of the parties in the TV streaming ecosystem. 7 Subscribers We offer consumers a live TV streaming platform for sports, news, and entertainment. We provide basic plans with the flexibility for consumers to purchase the Attachments best suited for them. Our base plan, fubo Starter, includes over 100+ channels, including many of the top Nielsen-rated networks, dozens of channels with sports, double digit news channels, and some popular entertainment channels. Subscribers have the option to add premium channels and additional channel packages, as well as upgrade Attachments such as more DVR storage with Cloud DVR Plus and additional simultaneous streams with Family Share. Advertisers As cord cutting continues and traditional Pay TV viewers decline, advertisers are increasingly allocating their ad budgets to Over-the-Top (“OTT”) platforms to reach these audiences. fuboTV’s sports-first live TV platform offers advertisers a growing and increasingly valuable live audience and provides un-skippable ad inventory on high quality content. Advertisers also benefit from combining traditional TV advertising formats with the advantages of digital advertising including measurability, relevancy, and interactivity. Content Providers Our TV streaming platform creates the opportunity for content providers to monetize and distribute their content to our highly engaged audience. In doing so, content providers are expanding their audiences, which have shrunk on traditional TV because of ongoing cord-cutting. By aggregating a broad variety of content to deliver a comprehensive offering on our platform, we believe fuboTV is able to provide greater engagement and value to subscribers than content providers would otherwise be able to deliver independently. Furthermore, our data-driven platform enables us to capture valuable insights on consumer behavior and preferences, which are increasingly valuable to our content providers. Seasonality We generate significantly higher levels of revenue and subscriber additions in the third and fourth quarters of the year. This seasonality is driven primarily by sports leagues, specifically the National Football League. In addition, we typically see the total number of subscribers on our platform decline from the fourth quarter of the previous year through the first and second quarter of the following year. We anticipate similar trends and user behavior for our recently launched Fubo Sportsbook given the seasonal nature of sports. Our Growth Strategy We believe that we are at the early stages of our growth and that we are at an inflection point in the TV industry where streaming has begun to surpass traditional linear Pay TV in several key areas, including content choice, ease of access and use across devices, and cost savings to consumers. We have identified potential growth opportunities, both in current markets and adjacent markets, that we believe may provide additional upside to our business model. The key elements to our growth strategy include: ● Continue to grow our subscriber base : As of December 31, 2021, fuboTV had 1,315,433 paid subscribers, including 185,626 added through the acquisition of Molotov, up from approximately 547,880 as of December 31, 2020. Our Sales and Marketing expenses relative to total revenues was approximately 22.3% in 2021 and we believe there is significant opportunity to accelerate subscriber acquisition by increasing our marketing expenditures on an absolute dollar basis. We will continue to utilize and analyze the data we have collected to help us become more efficient with our marketing campaigns relative to spend. ● Upsell and Retain Existing Subscribers : By improving our Attachment offerings, we have been able to steadily increase the quantity of Attachments sold within our subscriber base while continuing to improve our overall retention rates. By piggybacking on to our existing offerings and not meaningfully increasing our cost basis while increasing revenues, Attachments increase our margins. Through each Attachment, we provide incremental value to our paying subscribers and are able to capitalize on the incremental dollars earned through our ability to upsell. We have consistently upgraded our Attachment offerings, as well as optimized our merchandising and bundling of these offerings, and as a result have more than doubled the attach rate of our subscribers. 8 ● Grow Advertising Inventory: Improvements to our content offering, UI / navigational elements and content merchandising / targeting capabilities, combined with evolutions in customer behavior and growth in our subscriber base, have driven growth of our viewership over time. We are increasingly monetizing this engagement through advertising on the fuboTV platform. We intend to continue leveraging our data and analytics to deliver relevant advertising while improving the ability of our advertisers to optimize and measure the results of their campaigns. We also plan to continue to expand our direct sales teams to increase the number of advertisers who leverage our platform and continue improving our fill-rates and Cost Per Thousands (“CPMs”). ● Continue to Enhance Our Content Portfolio : Because we have the direct-to-consumer relationship and have the ability to analyze all the content that our subscribers consume, we believe we can continue to drive better subscriber experiences. We plan to continue to optimize our content mix to best suit our subscribers’ interests by leveraging our deep understanding of our subscribers through the data captured on the platform. ● Continue to invest in our technology and data capabilities: We believe that our technology platform, coupled with our content offering, differentiates us, and we will continue to invest in both to drive the subscriber experience. We plan to continue to enhance our product for sports viewers by increasing the number of 4K streams and enhancing the image quality of fast-paced games. We have also rolled out personalization capabilities for our subscribers, including Favorites List and User Profiles, which allow us to enhance our recommendation technology, thereby potentially increasing subscriber engagement and satisfaction. ● Continue to enter adjacent markets, including wagering: fuboTV, through our collaborations with premier programmers, content providers and advertisers, is very closely aligned with several adjacent markets. For example, our current sports-first platform lent itself to our recent entrance into the sports wagering market with the launch of Fubo Sportsbook in two states in the fourth quarter of 2021. We believe this is a market that fuboTV was well-positioned to enter given our unique live sport streaming offering, our deep knowledge of sports marketing and underlying technology platform. ● Expand Internationally: Outside of the United States, we currently operate in Canada, Spain and, through our acquisition of Molotov in 2021, France. With more than 3.5 billion soccer fans worldwide, in addition to all other sports fans and TV viewers, we believe there remains a significant opportunity to expand internationally. Intellectual Property Our intellectual property is an essential element of our business. We rely on a combination of patent, trademark, copyright and other intellectual property laws, confidentiality agreements and license agreements to protect our intellectual property rights. We also license certain third-party technology for use in conjunction with our products. We believe that our continued success depends on hiring and retaining highly capable and innovative employees, especially as it relates to our engineering base. It is our policy that our employees and independent contractors involved in development are required to sign agreements acknowledging that all inventions, trade secrets, works of authorship, developments and other processes generated by them on our behalf are our property and assigning to us any ownership that they may claim in those works. Despite our precautions, it may be possible for third parties to obtain and use without consent intellectual property that we own or license. Unauthorized use of our intellectual property by third parties, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business. Patents and Patent Applications As of December 31, 2021, we had four issued U.S. patents, three non-provisional U.S. patent applications, one U.S. design patent application, 18 granted international design registrations in three international design patents, three granted international patents and seven international patent applications pending. The issued and granted patents expire in 2033 and 2038, and the international design registrations have expiration dates ranging from 2035 to 2045. Although we actively attempt to utilize patents to protect our technologies, we believe that none of our patents, individually or in the aggregate, are material to our business. We will continue to file and prosecute patent applications when appropriate to attempt to protect our rights in our proprietary technologies. However, there can be no assurance that our patent applications will be approved, that any patents issued will adequately protect our intellectual property, or that such patents will not be challenged by third parties or found by a judicial authority to be invalid or unenforceable. 9 Trademarks We also rely on several registered and unregistered trademarks to protect our brand. As of December 31, 2021, we had 37 trademarks registered globally. “fuboTV” is a registered trademark in the United States and the European Union. Competition The TV streaming market continues to grow and evolve as more viewers shift from traditional Pay TV to streaming. There is significant competition in the TV market for users, advertisers, and broadcasters. We principally compete with Pay TV operators, such as Comcast, Cox and Altice, along with other virtual multichannel video programming distributors (“vMVPDs”), such as YouTube TV, Hulu Live and Sling TV. While the presence of these competitors in the market has helped to boost consumer awareness of TV streaming, contributing to the growth of the overall market, their resources and brand recognition present substantial competitive challenges. We compete on various factors to acquire and retain users. These factors include quality and breadth of content offerings, especially within live sports; features of our TV streaming platform, including ease of use and superior user experience; brand awareness in the market; and perceived value relative to the price of our service. Additionally, we compete for user engagement. Many users have multiple subscriptions to various streaming services and allocate time and money between them. We also face competition for advertisers, which in part depends on our ability to acquire and retain users. Providing a large and engaged audience is crucial for advertisers on our live TV streaming platform. In the TV streaming market, the effectiveness of advertisements and return on investments play a pivotal role. As such, we are also competing for advertisers based on the return of ads compared to various other digital advertising platforms, including mobile and web. Additionally, advertisers continue to allocate a large portion of spend to advertise offline. Therefore, we also compete with traditional media platforms such as traditional linear TV and radio. We are increasingly leveraging our data and analytics capabilities to optimize advertisements for both users and advertisers. We need to continue to maintain an appropriate advertising inventory for the growing demand for ads on our platform. Furthermore, we compete to attract and retain broadcasters. Our ability to license content from broadcasters is dependent on the scale of our user base as well as license terms. In addition, our gaming business faces intense competition among online and mobile gaming and sports wagering providers. These industries are characterized by increasing consumer demand and technological advances. A number of established, well-financed companies producing online and mobile sports wagering products and services compete with our product and service offerings. These competitors may spend more money and time on developing and testing products and services, undertake more extensive marketing campaigns, adopt more aggressive pricing or promotional policies, or otherwise develop more commercially successful products or services than us. Human Capital As of December 31, 2021, we had approximately 530 employees, of which approximately 400 were located in North America and 130 were located in Europe and India. We consider our relationship with our employees to be good. None of our U.S. or Indian employees is represented by a labor union or covered by a collective bargaining agreement. Our French employees are covered by the national collective bargaining agreement for the consulting and engineering activities in France. We view our employees as central to the success of our business and achieving our mission. We are continuously focused on our culture, recruiting, retaining and motivating our employees, employee development and engagement, diversity, equity and inclusion. As we expand globally, including through our acquisitions of Molotov in France and Edisn in India during 2021, we are increasingly focused on these goals. We believe the different backgrounds, traditions, views and talents each of our employees brings to fuboTV enrich the company as a whole and help us achieve executional excellence. As part of these efforts, we also formed a Diversity Council in August 2020, comprised of different team members throughout the organization, who work together to recommend and help drive diversity and inclusion initiatives within the company. We also provide several programs and benefits to our employees designed to recruit, retain and incentivize high quality talent, including stock-based compensation awards and cash-based performance bonus awards under our long-term incentive plans, as well as health and welfare benefits and programs, and retirement savings plans. 10 In response to the COVID-19 pandemic, we have taken a number of precautionary measures to protect the health and safety of our employees, including by transitioning our workforce to remote working as we temporarily closed our offices beginning in March 2020. We have subsequently reopened our offices on an optional basis, however, most of our employees continue to work remotely, and, in the long term, we expect some personnel to continue to do so on a regular basis. We continue to monitor the ongoing COVID-19 pandemic, and the related impacts and responses, and will adjust our current policies as more information and public health guidance become available. Impact of COVID-19 The global spread of COVID-19 and the various attempts to contain it continued to create significant volatility, uncertainty and economic disruption in 2021. The impact of the COVID-19 pandemic on our operations began towards the end of the first quarter of 2020, impacting advertising markets and the availability of live sport events, as numerous professional and college sports leagues cancelled or altered seasons and events. During 2021, the ongoing COVID-19 pandemic continued to accelerate the shift of TV viewing away from traditional pay TV to streaming TV and the on-going shift of advertising budgets away from traditional linear TV into streaming offering. While in 2021 we experienced an increase in TV streaming and our overall business was largely unaffected by the COVID-19 pandemic there can be no assurance that these positive trends will continue during the remainder of 2022 and beyond. Merger with fuboTV Sub On April 1, 2020, fuboTV Acquisition Corp., a Delaware corporation and our wholly-owned subsidiary (“Merger Sub”) merged with and into fuboTV Sub, whereby fuboTV Sub continued as the surviving corporation and became our wholly-owned subsidiary pursuant to the terms of the Agreement and Plan of Merger and Reorganization dated as of March 19, 2020, by and among us, Merger Sub and fuboTV Sub (the “Merger Agreement”). Following the Merger, we changed our name from “FaceBank Group, Inc.” to “fuboTV Inc.,” and we changed the name of fuboTV Sub to “fuboTV Media, Inc.” The combined company operates under the name “fuboTV,” and our trading symbol is “FUBO.” See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Merger with fuboTV Sub” in Part II, Item 7 in this Annual Report for a further description of the Merger. Government Regulation Our business and our devices and platform are subject to numerous domestic and foreign laws and regulations covering a wide variety of subject matters. These include general business regulations and laws, as well as regulations and laws specific to providers of Internet-delivered streaming services and Internet-connected devices. New or modified laws and regulations in these areas may have an adverse effect on our business. The costs of compliance with these laws and regulations are high and are likely to increase in the future. We anticipate that several jurisdictions may, over time, impose greater financial and regulatory obligations on us. If we fail to comply with these laws and regulations, we may be subject to significant liabilities and other penalties. Additionally, compliance with these laws and regulations could, individually or in the aggregate, increase our cost of doing business, impact our competitive position relative to our peers, and otherwise have an adverse impact on our operating results. For additional information about the impact of government regulations on our business, see “Risk Factors— Risks Related to Regulation” and “Risk Factors—Risks Related to Privacy and Cybersecurity” in Part I, Item 1A in this Annual Report. Data Protection and Privacy We are subject to various laws and regulations covering the privacy and protection of users’ data. Because we handle, collect, store, receive, transmit, transfer, and otherwise process certain information, which may include personal information, regarding our users and employees in the ordinary course of business, we are subject to federal, state and foreign laws related to the privacy and protection of such data. These laws and regulations, and their application to our business, are increasingly shifting and expanding. Compliance with these laws and regulations, such as the California Consumer Privacy Act and the European Union General Data Protection Regulation 2016/679 (the “GDPR”) could affect our business, and their potential impact is unknown. Any actual or perceived failure to comply with these laws and regulations may result in investigations, claims and proceedings, regulatory fines or penalties, damages for breach of contract, or orders that require us to change our business practices, including the way we process data. 11 We are also subject to breach notification laws, including the GDPR, in the jurisdictions in which we operate, and we may be subject to litigation and regulatory enforcement actions as a result of any data breach or other unauthorized access to or acquisition or loss of personal information. Any significant change to applicable laws, regulations, interpretations of laws or regulations, or market practices, regarding the processing of personal data, or regarding the manner in which we seek to comply with applicable laws and regulations, could require us to make modifications to our products, services, policies, procedures, notices, and business practices, including potentially material changes. Such changes could potentially have an adverse impact on our business. For additional information about the impact of data protection and privacy regulations on our business, see “Risk Factors—Risks Related to Privacy and Cybersecurity” in Part I, Item 1A in this Annual Report. Gaming Regulations The Company is or is expected to be subject to various U.S. federal and state laws as well as foreign regulations that affect our ability to launch and operate a sportsbook and offer other gaming-related products. These product offerings are generally subject to extensive and evolving regulations that could change based on political and social norms and that could be interpreted in ways that could negatively impact our business. The gaming industry, including any sportsbook product offering, is highly regulated and subject to extensive regulation under the laws, rules, and regulations of the jurisdictions in which we operate. These laws, rules and regulations generally concern the responsibility, financial stability, integrity and character of the owners, officers, directors, key management employees and persons with material financial interests in the gaming operations along with the integrity and security of our sportsbook offerings and the technologies supporting such offering. Violations of laws or regulations in one jurisdiction could result in disciplinary action in that and other jurisdictions. As well, as a condition of operating in certain jurisdictions, we must obtain either a temporary or permanent license, approval, or determination of suitability from the relevant gaming authorities. We seek to ensure that we obtain all necessary licenses to develop and put forth our offerings in the jurisdictions in which we operate or seek to operate. Gaming laws and regulations in certain jurisdictions require us, and/or our subsidiaries engaged in gaming operations, certain of our directors, officers, and key management employees, and in some cases, certain of our shareholders, to obtain licenses, qualifications or findings of suitability from gaming authorities. Such licenses, qualifications or findings of suitability typically require a determination that the applicant qualifies or is suitable to hold the license, qualification or finding of suitability. Various factors are considered including, without limitation, the financial stability, character integrity and responsibility of the applicant; the quality and security of the applicant’s gaming platform, hardware and related software and the applicant’s ability to operate its gaming business in a responsible manner and in compliance with all applicable laws and regulations. Gaming authorities have broad authority to, subject to certain administrative procedural requirements, deny an application, or limit, condition, revoke or suspend any license or approval issued by them, or demand that named individuals or shareholders be disassociated from a gaming business. Various events may trigger revocation of such a gaming license or another form of sanction which may vary by jurisdiction. Examples of such events include, without limitation, conviction of certain persons with an interest in, or key personnel of, the licensee of an offense that is punishable by imprisonment or may otherwise cast doubt on such person’s integrity; failure without reasonable cause to comply with any material term or condition of the gaming license; obtaining the gaming license by a materially false or misleading representation or in some other improper way; or violation of an applicable gaming law or regulation or other law or regulation, such as anti-money laundering or terrorist financing laws or regulations. For additional information about the impact of gaming regulations on our business, see “Risk Factors— Risks Related to Our Products and Technologies” and “Risk Factors – Risks Related to Regulation” in Part I, Item 1A in this Annual Report. Corporate Information We were incorporated in 2009 as a Florida corporation under the name York Entertainment, Inc., and on August 10, 2020, our name was changed to fuboTV Inc. fuboTV Sub was incorporated in 2014 as a Delaware corporation. Our principal executive offices are located at 1290 Avenue of the Americas, New York, New York 10104, and our telephone number is (212) 672-0055. Our website address is at https://fubo.tv . Information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report, and you should not consider information on our website to be part of this Annual Report. 12 Available Information Our internet website address is www.fubo.tv. At our Investor Relations website, ir.fubo.tv, we make available free of charge a variety of information for investors, including our annual report, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file that material with or furnish it to the Securities and Exchange Commission (“SEC”). The information found on our website is not part of this or any other report we file with, or furnish to, the SEC. We announce material information to the public through filings with the SEC, the investor relations page on our website, press releases, our Twitter account (@fuboTV), our Instagram account (@fubotv), our Facebook page (www.facebook.com/fuboTV), our LinkedIn page (www.linkedin.com/company/fubotv/), public conference calls, and webcasts in order to achieve broad, non-exclusionary distribution of information to the public and for complying with our disclosure obligations under Regulation FD. We encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels. Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.