Crawl, walk, run.
That’s how David Gandler has taken FuboTV, in the span of a few years, from streaming tape-delayed German soccer to offering one of the most completeand sports-heavystreaming TV packages available.
It’s particularly impressive considering FuboTV is the only independent service not run by a major media company like YouTube, Hulu, or DirecTV. Or, as one of his angel investors put it, FuboTV is like a kite dancing in the hurricane (yea, it’s a James Bond Skyfall quote).
“You’ve got big media companies that have big egos,” said Gandler, CEO and one of FuboTV’s three cofounders. “In many cases, you have distributors that want to undercut you with every opportunity and have deep pockets, so it just makes for a very complicated business.”
In a market that has been flooded with TV shows, live sports remain the scarcest and most in-demand media around. It’s also some of the most fragmented, with rights for leagues and teams spread out among a swath of companies.
Live sports have also taken on a particularly valuable place in the media ecosystem, thanks to the growing number of people who are abandoning traditional TV and pricey cable subscriptions for internet-based alternatives. Sporting events are a way to keep those people hooked on cable plans, or at least get them to pay for expensive a la carte services.
This is essentially FuboTV’s proposition: For $34.99 per month, users get a relatively complete cable package (including completely non-sports channels like Oxygen and the Weather Channel) with a heavy dose of sports, as well as local channel. NBC and Fox are already on boardand CBS is launching in the coming weeks. This gives FuboTV a near-complete lineup of NFL games.
It’s not perfect, and the service still has its gaps. With no deal with TBS, TNT, or ESPN, there’s little NBA basketball aside from the games on NBA TV (usually one or two games per night).
What it might lack in some areas, it makes up for in its core passion: Soccer. FuboTV offers just about every important soccer game you could want, and then some.
So how did an independent company most people have never heard of end up striking enough deals with media giants to amass a formidable TV and sports lineup?
Crawl, walk, run. Deals with soccer clubs begat deals with sports channels begat deals with smaller networks begat deals with larger networks.
And now, FuboTV is playing in the big leagues, competing directly with some of the biggest companies in media.
“I knew that to put these deals together I had to demonstrate some track record and some success,” Gandler said. “You demonstrate every quarter, ‘Hey look what we’ve done here.'”
In the early days of ESPN, the three big broadcast networks took a look at the young cable sports channel and laughed.
Decades before it became a media juggernaut, ESPN was a tiny operation in the middle-of-nowhere Connecticut showing tape-delayed games and some second-rate highlights. The networks at the time didn’t realize that a 24-hour sports channel would end up being among the most valuable media brands in the world.
It’s a scene captured in a book by former ESPN President Jim Bodenheimer, Every Town is a Sports Town. Gandler recalls it with some familiarity. He showed FuboTV to ESPN, which scoffed at the offering.
“I had the same conversation with management from ESPN two years ago when I had 10,000 subs,” Gandler said. “I said, ‘You guys, [need to] read the book. It’s the same thing.'”
It’s hard to blame ESPN. FuboTV didn’t offer much in the early days. It started with video-on-demand content of Borussia Dortmund, a German soccer club. Then it added some video from Portuguese club Benefica. These teams aren’t huge in the U.S., but they have some ardent followers, and FuboTV was able to build a small subscriber base.
“It would work five minutes out of the 90 minutes. It was terrible, people were upset, but that’s how you start.”
Those subscribers proved key. If FuboTV had just begun to crawl, its next deals would be the first steps into livestreaming. And like with any young operation, it wouldn’t prove easy. The company was able to livestream 17 Benefica games from GolTV, which had the rights to the games, but it wasn’t able to put them on the internet.
“We got those 17 games that they weren’t airing on television and… it was terrible by the way,” Gandler said. “It would work five minutes out of the 90 minutes. It was terrible, people were upset, but that’s how you start.”
FuboTV had built a solid niche out of acquiring soccer content and attracting subscribers, then leveraged that to acquire better content and even more subscribers.
The next move, however, would be different. To really go after the live sports market, the company would need to venture into the messy world of retransmission rightsnegotiating with local affiliate broadcasters to include their channels in FuboTV’s package.
This is hard to do for a lot of reasons, but the technology required is among the biggest hurdles. Most companies either go to an existing vendor (such as BAMTech and PlayStation Vue) or use their own systems (such as Sling TV).
FuboTV went another directionit built its own proprietary system that includes a variety of the necessary features to comply with the byzantine rules of retransmission. It’s also the kind of thing that can make a company money if it decides to offer it up as a service to other companies, as Major League Baseball did with its streaming operationnow the industry-leading BAMTech.
“It’s a very calculable asset,” Gandler said. “Particularly if you look at the future of livestreaming globally, this could be a very important asset to the company.”
With the tech and an initial retransmission deal with Univision, FuboTV was ready for the big time. In December 2016, FuboTV announced that it had struck deals with NBC, Fox, and a variety of other programmers to bring their channels to the platform.
While the deal meant a variety of major U.S. sports would now be available on FuboTV, it also pushed the service beyond just sports. The service now offers a fuller package with a variety of non-sports channels like FXX and the History Channel. It’s no longer a sports bundle; it’s now a bundle with a focus on sports.
“The way we look at it is that our point of differentiation is sports first, and then we’re going to give you a limited amount of other content,” Gandler said. “Our goal is to hit multi-million [subscribers] but we’re not going to be number one.”
Not everyone is convinced the bundle strategy was the right move. Jan Dawson, analyst at Jackdaw research, said in a note that he was worried that the company’s offering is now too similar to other internet TV bundles and is still missing some core componentsESPN among them.
“Overall, FuboTV presents yet another example of the challenges of truly disrupting the TV market given the power still held by traditional channel owners and the existing pay TV ecosystem,” Dawson wrote.
“That’s going to be an uphill battle, and I would think FuboTV would have done better to stick with its more soccer/sports-centric original offering, which was at least somewhat unique in the market (though, without ESPN or the Turner channels, rather incomplete),” Dawson added.
A venture capitalist who kicked the tires on FuboTV (and requested anonymity) had a similar outlook: It’s hard to really back a startup that is going face-to-face with industry giants.
“I love the idea,” the investor said. “Just such a hard market right now… so much competition from such big people.”
“It’s like dancing with elephants,” the investor added.
FuboTV’s midtown New York offices are decked out like any good startup that just raised $55 million. There’s big TVs showing sports, an open floor plan, and plenty of meeting roomsall named after English soccer clubs.
In the Chelsea room, Gandler provided a glimpse at where FuboTV is headed.
The company, built on U.S. subscribers, is looking abroad for its future. That’s a logical move, considering its continued focus on soccer.
“We’re looking at this more like a Netflix in the sense that we feel that 80 percent of our users will be non-U.S. users,” Gandler said.
He also offers a compelling thought experiment for why bundles (and not a la carte) have to be the future of sports.
Let’s say that there’s about $50 billion worth of sports rights out there from what he calls “premium to third tier.” Now imagine one company has all those rights and can get 100 million households to pay for a service to access those sports at $12 per month, for a cool $12 billion. Add in another $12 billion for advertising.
That’s still not half of what the original outlay was. The economics of a pure-sports service just aren’t great if you’re not able to get those users to pay for other content as well. This is why Gandler believes sports fans will have to pay for a bundle.
As for why the companies holding the rights will work with them, Gandler thinks his strategy of complimenting partners rather than competing with them will get rights holders to play ball.
This is how Gandler thinks he can go from walk to run.
“We are the most programmer-friendly company in the world,” Gandler said. “We have no interest in disrupting their business. We want to be additive.”