The Pay-TV Innovation Forum is a global research programme for senior pay-TV and content executives, developed by NAGRA and MTM, and designed to catalyse growth and innovation across the global TV industry, at a time of tremendous change and disruption.
As part of the programme, we are publishing a series of interviews with leading TV industry executives from around the world to explore their views, perspectives and experiences of innovation. In this interview, Ben Grad, Head of Content Strategy and Acquisition for fuboTV, shares his views on the changes in the US pay-TV market, how digital-native businesses acquire and retain new subscribers, and the importance of super-serving different customers.
How would you describe the key changes impacting the pay-TV market in the US over the last 12-18 months?
In addition to well-known longer-term trends impacting the market, there are a few more recent ones. First of all, consumers are increasingly moving to smaller and more targeted content packages. People don’t want to pay for 300 channels if they’re only ever going to watch fewer than 20. This has been an issue for a while now, but there has been a real acceleration of people moving away from big bundles over the last 12-18 months. This trend is driving consumers towards new video service providers.
Secondly, consumers are increasingly questioning the value of proprietary set-top boxes from legacy players: “Why do we need them in our living rooms? Why are we expected to pay extra for them? We already have multiple devices at home that can support video services like Netflix so why should we spend an additional $12 per month to get yet another box?” While some legacy businesses are starting to offer more options for consumers to use their own devices, most rely on that extra $12 to support their technology investments. Virtual MVPDs like fuboTV do not have those issues – we partner with device manufacturers like Roku and Apple who are thrilled to have us on their platforms and we do not have to maintain high margins to support major infrastructure investments.
FuboTV started out as a soccer streaming specialist, but you’re now referring to fuboTV as a vMVPD. How has the proposition evolved over the last couple of years?
FuboTV started in early 2015 as an international soccer streaming service. We’ve invested a lot in developing our own technology architecture to run the service. In 2016 we took a careful look at the market and saw an opportunity to go beyond sports streaming. The market was stale and stagnant, with traditional MVPDs having some of the lowest Net Promoter Scores and customer approval ratings of any industry in the USA. With rapid evolution of our technology platform, our ability to compete with traditional MVPDs went from being a pipe dream just a couple of years ago to a real market opportunity. In early 2017, we switched to a vMVPD model, while also continuing to serve soccer fans. We’re now competing with some of the biggest companies in the world, taking market share and growing subscriber base. It’s a great story for us, our subscribers, and content providers.
What are fuboTV’s key priorities going forward?
First of all, our technology platform is key and core to what we do. Having a world-class platform with world-class picture quality is critical. For example, during the World Cup we were the first US vMVPD to deliver content in 4K HDR Beta. We need to continue improving our platform over time. Secondly, it’s about delivering personalised experiences to our customers. We’ve been doing more in terms of having a custom user interface and have always been mindful of how we can deliver more relevant regional and local content to our customers. Personalisation can help us super-serve NFL and soccer fans and take their experience to the next level. Local and regional content is also an important area – we’re already the industry leaders, carrying 33 regional sports networks, and are looking to grow that competitive advantage over time. Finally, we need to continue providing more options to our customers. We serve a growing variety of tastes and preferences, ranging from someone who’s happy with a basic package to someone who wants more entertainment and movies to someone who’s a super fan of NFL or Bundesliga.
How do you go about distributing and marketing your service to consumers?
The starting point is to be on all the platforms that consumers expect vMVPDs to be on, such as Apple TV, Roku, Android or iOS devices. In terms of marketing, we don’t have the massive budgets of our traditional MVPD competitors like AT&T who offer their own vMVPD services, but we’re able to be much more efficient when it comes to acquiring new customers. What we’re spending per acquired customer is much lower compared to the market average. As we are a digital native company, we're hyper-efficient at targeting and acquiring customers through digital means. Netflix isn't a competitor of ours directly but if you look at what they've done on marketing over the last 15 years, they are not spending $800 million on national brand campaigns, they've been out there from a targeted, digital perspective. I think frankly that the corporate model of how you do consumer marketing is not the most efficient way to drive subscribers to a digital platform.
Customer retention is a challenge for all subscription-based service providers, but how does it differ for digital natives versus legacy businesses?
When you have customers that are locked in 2-year contracts - endemic in a legacy business - you’re going to have lower churn. But we want to provide the right value, for the right customers, for the right price. We want you to try us out, and think for most customers we will be a great answer but we don’t look to tie people down in a 2-year deal. In the digital space, churn is higher than for a traditional pay-TV provider, but our customer acquisition cost is a fraction of what those guys are paying. They might have high triple digits to low quadruple digits for customer acquisition costs because of the way they market, and the way customers behave. We can do it in double-digit subscriber acquisition costs. In some cases, if it’s an organic subscriber add, it’s virtually zero.