根據《業務合併協議》，在交割日，(i) Hulu (x) 將與就 Hulu Live 服務（如下文所定義）中任何節目服務、頻道或網絡的轉播、分發、傳輸、展示或廣播而訂立及管理相關協議及其他類似合同有關的若干資產（「HL 業務資產」）注入 Hulu Live LLC（「Hulu Live」）；(y) 促使 Hulu Live 僅承擔《業務合併協議》中所界定的 HL 業務負債；以及 (z) 通過轉讓其對 Fubo Operations LLC（「Newco」）在、針對並依據……的所有權利、所有權及權益，將 Hulu Live 業務及 HL 業務資產注入該新成立的實體。100將Hulu Live的股權權益的%轉讓給新公司，(ii) 本公司進行了傘形合夥制C型公司（「向上-C」）重組，並出資…100將公司此前在交割日之前已將其業務注入的全新全資子公司Fubo Services LLC的股權權益中的%轉讓給Newco，以換取Newco的單位（「Newco單位」），從而使Hulu持有一定數量的Newco單位，其合計代表…70% 的經濟權益（按完全攤薄基準計算）歸屬於新公司，且本公司持有一定數量的新公司單位，合計代表…30% 的經濟權益（按完全稀釋基準計算）在新公司中，且 (iii) 公司向 Hulu 發行了公司 B 類普通股，其合計代表…70% 的公司表決權（按完全稀釋後計算）。HL 業務資產包括若干運輸協議、聯合認購協議項下的相關權利，以及與 Hulu 線性多頻道訂閱視頻節目分發服務中名爲「Hulu + Live TV」的部分（以下簡稱「Hulu 直播服務」）專屬相關的用戶數據與信息、廣告或贊助協議，此外還包括所有其他與 Hulu 直播服務專屬相關的資產（包括知識產權），以及構成「Live TV」品牌的全部知識產權。
2023年12月29日，公司與Mudrick Capital Management, L.P.的若干關聯方及關聯基金——這些基金持有公司現有的2026年可轉換債券——達成了一項私下協商的交換協議，以交換$205.82026年可轉換債券的100萬美元本金，以美元計價。177.5公司將於2029年到期的新發行高級擔保可轉換債券（以下簡稱「2029年可轉換債券」）的累計本金總額爲數百萬美元，但須滿足慣例交割條件（以下簡稱「交換」）。該交換於2024年1月2日完成，屆時，2029年可轉換債券已根據並受制於公司、其中列明的擔保人以及美國銀行信託公司全國協會作爲受託人兼抵押品代理於2024年1月2日簽署的信託契約而發行。
DISH Technologies, LLC 等訴 FuboTV Media Inc.，案號：1:23-cv-00986（特拉華聯邦地區法院）
2023年9月6日，DISH Technologies L.L.C. 和 Sling TV L.L.C.（統稱爲「DISH」）在特拉華聯邦地區法院提起訴訟，指控 FuboTV Media Inc.（現更名爲 FuboTV Media LLC）（「FuboTV Media」）通過 FuboTV Media 應用程序進行視頻流傳輸，侵犯了 DISH 的八項專利，並尋求損害賠償和禁令救濟。
根據《業務合併協議》，在交割日，(i) Hulu (x) 將與 Hulu Live 服務（如下文所定義）之節目服務、頻道或網絡的轉播、分發、傳輸、展示或播出相關的業務——即就相關及旨在實現上述目的而訂立的傳輸協議及類似合同的談判與管理業務——所涉及的若干資產（以下簡稱「HL 業務資產」）注入 Hulu Live LLC（以下簡稱「Hulu Live」）；同時，Hulu Live 僅承擔《業務合併協議》中所界定的 HL 業務負債；此外，Hulu 還通過將其持有 Hulu Live 100% 股權的所有權利、所有權及權益全部轉讓予 Newco，將 Hulu Live 業務及 HL 業務資產注入新設立的實體 Fubo Operations LLC（以下簡稱「Newco」）；(ii) 公司實施了傘形合夥制 C 型公司（「Up-C」）重組，並將其此前於交割日前已注入公司的全資子公司——Fubo Services LLC——的 100% 股權注入 Newco，以換取 Newco 的單位份額（以下簡稱「Newco 單位」），從而使 Hulu 持有合計佔 Newco 經濟權益 70% 的 Newco 單位（按完全攤薄基準計算），而公司則持有合計佔 Newco 經濟權益 30% 的 Newco 單位（按完全攤薄基準計算）；(iii) 公司向 Hulu 發行了公司 B 類普通股，其合計代表公司 70% 的表決權權益（按完全攤薄基準計算）。HL 業務資產包括若干傳輸協議、聯合訂閱協議項下的相關權利，以及與 Hulu 的線性多頻道訂閱視頻節目分發服務板塊——即名爲「Hulu + Live TV」的產品——專屬相關的用戶數據與信息、廣告或贊助協議（該服務以下簡稱「Hulu Live 服務」），以及所有其他與 Hulu Live 服務直接相關的資產（包括知識產權），並涵蓋構成「Live TV」品牌的全部知識產權。
總訂閱用戶數是指已完成註冊、已激活支付方式（每種套餐對應一名付費訂閱用戶）且在相關期間結束當月成功收取費用的直播電視流媒體服務訂閱用戶總數，其中包括Fubo和Hulu + Live TV。參與免費或試用服務的訂閱用戶不計入此指標。我們認爲，總付費訂閱用戶數是衡量我們在與Hulu + Live TV完成業務合併後用戶規模的一項有用指標。爲便於比較，截至交割日之前各期的總訂閱用戶數，已按照該業務合併若於該期初即已完成的情形進行調整並予以體現。
2023年9月6日，DISH Technologies L.L.C. 和 Sling TV L.L.C.（統稱爲「DISH」）在特拉華聯邦地區法院提起訴訟，指控 FuboTV Media Inc.（現更名爲 FuboTV Media LLC）（「FuboTV Media」）通過 FuboTV Media 應用程序進行視頻流傳輸，侵犯了 DISH 的八項專利，並尋求損害賠償和禁令救濟。
我們能否在到期時按時足額償還本金和利息，或根據現有債務協議對借款進行再融資，將取決於我們未來的經營表現，以及我們能否進一步籌集股權或債權融資。而這些融資的可得性又受制於諸多超出我們控制範圍的經濟、金融、競爭及其他因素。未來，我們的業務未必能產生足夠的經營現金流，以同時：(i) 履行我們對現有及未來債權人的各項義務；以及 (ii) 支撐我們開展必要的資本支出。若我們無法實現上述現金流目標，或無法進一步籌措資金，我們可能不得不採取一項或多項替代方案，例如削減或推遲投資與資本支出、出售資產、進行再融資，或以條件苛刻且可能大幅攤薄股權的方式另行籌集資本。此外，2029年票據契約的條款允許以實物方式支付2029年可轉換票據的利息。若我們選擇以實物形式支付2029年可轉換票據的利息，則尚未償還的2029年可轉換票據本金總額將會增加。
在業務合併交割完成後，我們與新公司及Hulu簽署了一份稅務應收款協議。根據該協議，我們就自身實現的特定稅收利益（或在我們選擇終止稅務應收款協議並據此加速結算的情況下，被視爲已實現的稅收利益），須向Hulu支付現金款項。通常情況下，我們有義務就我們因使用某些歷史淨經營虧損結轉（「NOL」）而獲得的稅收利益，按以下兩者孰低者向Hulu支付一定比例的款項：(i) 70%；或 (ii) 在該NOL被用於納稅年度初時，Hulu所持新公司股權比例。此外，我們通常還需就以下兩項向Hulu支付70%的稅收利益：(i) 因未來Hulu對新公司單位進行贖回或交換、新公司實施特定分紅（或視同分紅），以及根據稅務應收款協議所作支付而預期自新公司取得的稅務基礎調整；以及 (ii) 因我們依據稅務應收款協議所承擔的推定利息及其他利息支付而產生的扣除項目。我們依賴新公司派發的現金股息來履行稅務應收款協議項下的付款義務。我們在稅務應收款協議項下向Hulu支付的任何款項，通常會減少本可爲我們所用的現金金額。鑑於諸多因素存在不確定性，我們無法準確量化因新公司單位的贖回或交換而可能實現的稅收利益，以及據此我們未來根據稅務應收款協議向Hulu支付的款項金額；不過，我們預計，此類支付在未來可能會相當可觀。
我們與部分分銷合作伙伴簽訂的協議中載明瞭相關義務，要求我們向這些合作伙伴提供與向其他分銷合作伙伴同等的技術功能、內容、定價及套餐，並且還須確保在各分銷合作伙伴間就我方應用的上線推廣與市場推廣方面實現一視同仁。這些平等義務可能會限制我們在個別分銷合作伙伴處推進技術創新或開展合作的能力，也可能制約我們與不同合作伙伴協商達成有利交易、或以其他方式提供更優質產品和服務的潛力。由於我們在不同分銷合作伙伴處的技術功能研發進度不一、時間各異，目前我們僅在部分分銷平台上推出了一些增強型技術功能，而這些功能並未同步在其他分銷平台上開放，從而在一定程度上影響了我們面向所有消費者、 across all our distribution platforms 的產品與服務的品質與一致性。此外，各分銷合作伙伴之間技術開發進程的滯後，還使我們面臨違反與相關分銷平台所約定的平等義務的風險，進而危及我們與各分銷合作伙伴之間協議的穩定性與可預期性。
Newco、Hulu Live 以及 Fubo OpCo 已與 Hulu 簽訂了多項商業協議，其中包括一項商業服務協議和一項品牌許可協議。根據這些協議，Hulu 同意在業務合併交割完成後，視具體情況向 Newco、Hulu Live 或 Fubo OpCo 提供若干特定服務。我們與 Hulu 就這些安排進行了協商，旨在爲 Hulu Live、Fubo OpCo 和 Newco 成爲 Hulu 的子公司做好準備。儘管 Hulu 在這些協議有效期內依法有義務向 Hulu Live、Fubo OpCo 和 Newco 提供相關服務，但尚無法確保在協議到期後，這些服務仍能以同等水平持續提供，亦無法保證 Newco、Hulu Live 或 Fubo OpCo（視具體情況而定）能夠在合理期限內或以可比條件及時替代這些服務。
該商業服務協議的初始期限爲五年，經雙方協商一致，可續簽額外五年。在協議有效期內，Hulu Live 未經許可不得以任何方式在 Hulu Live 服務之外另行分發 Hulu Live 服務或其任何節目內容。因此，在協議存續期間，我們可能無法替代 Hulu 所提供的各項服務或功能。此外，商業服務協議到期後將如何影響我們的用戶及數據也存在不確定性，尤其是在 Newco 可能不再作爲 Hulu 的子公司運營的情況下。若在商業服務協議到期後，我們無法從 Hulu 或第三方處獲得具有可比性的條款，Hulu Live 業務的分發渠道、用戶增長、營銷效率、品牌定位以及廣告變現能力都可能受到重大不利影響。
If we identify material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, investors could lose confidence in the accuracy and completeness of our financial reports.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal control over financial reporting. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting.
While we have historically furnished this report, the Hulu Live Business has historically existed and functioned as part of the consolidated business of Hulu and Disney and, as a standalone entity, has not been subject to the information and reporting requirements of the Sarbanes-Oxley Act. Therefore, to bring us into compliance with Section 404 of the Sarbanes-Oxley Act, we will be engaged in a process to document and evaluate internal controls for Newco and the combined business. We will need to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to establish and document internal controls for the combined business, validate through testing that controls are functioning as documented and integrate the Hulu Live Business into the continuous reporting and improvement process for internal control over financial reporting already established at our business. The integration of Newco and the Hulu Live Business into our accounting and operations may make it more difficult for us to comply with Section 404 of the Sarbanes-Oxley Act.
If during the evaluation and testing process we identify one or more material weaknesses in its internal control over financial reporting, our management will be unable to assert that our internal control over financial reporting is effective. Even if management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect to our internal controls or the level at which internal controls are documented, designed, implemented, or reviewed. If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm expresses an adverse opinion with respect to effectiveness of internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of the Class A Common Stock could be adversely affected and we could become subject to litigation or investigations by the NYSE, the SEC or other regulatory authorities, which could require additional financial and management resources.
Our key metrics and other estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may seriously harm and negatively affect our reputation and our business.
We regularly review key metrics related to the operation of our business to evaluate growth trends, measure our performance, and make strategic decisions. These metrics are calculated using internal company data and have not been validated by an independent third party. While these numbers are based on what we believe to be reasonable estimates of our subscriber base for the applicable period of measurement, there are inherent challenges in measuring how our platform is used across large populations.
Errors or inaccuracies in our metrics or data could result in incorrect business decisions and inefficiencies. For instance, if a significant understatement or overstatement of subscribers were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of subscribers to satisfy our growth strategies.
In addition, advertisers generally rely on third-party measurement services to calculate our metrics, and these third-party measurement services may not reflect our true audience. If advertisers, partners, or investors do not perceive our subscriber, geographic, or other demographic metrics to be accurate representations of our subscriber base, or if we discover material inaccuracies in our subscriber, geographic, or other demographic metrics, our reputation may be seriously harmed, and our business and operating results could be materially and adversely affected.
Preparing and forecasting our financial results requires us to make judgments and estimates which may differ materially from actual results, and if our operating and financial performance does not meet the guidance that we provide to the public, the market price of our Class A Common Stock may decline.
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. We base such estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, but actual results may differ from these estimates. Using such estimates has the potential to negatively impact the results we report which could negatively impact our stock price.
In addition, from time to time, we release guidance regarding our future performance. Such guidance is based upon a number of assumptions and estimates that, although presented with numerical specificity, are inherently subject to business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. Any such guidance will be composed of forward-looking statements subject to the risks and uncertainties described in this Quarterly Report and in our other public filings and public statements. Our actual results may not always be in line with or exceed, and could differ materially from, any guidance we have provided, especially in times of economic uncertainty such as the current environment. If, in the future, our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts, or if we reduce or withdraw our guidance for future periods, the market price of our Class A Common Stock may decline.
Impairment in the carrying value of goodwill or long-lived assets could negatively affect our operating results.
We have a significant amount of goodwill and long-lived assets on our unaudited condensed consolidated balance sheet. Under generally accepted accounting principles, annually, and upon the identification of a triggering event, management is required to perform an evaluation of the recoverability of goodwill and long-lived assets. Triggering events potentially warranting an interim goodwill impairment test include, among other factors, declines in historical or projected revenue, operating income or cash flows, and sustained declines in the Company’s stock price or market capitalization, considered both in absolute terms and relative to peers. If business conditions or other factors cause profitability and cash flows to decline, we may be required to record non-cash impairment charges. If the carrying value of our reporting unit exceeds the current fair value, the goodwill is considered impaired and is reduced to fair value by a non-cash charge to earnings. The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made.
We have recorded material non-cash goodwill and long-lived asset impairment charges in prior periods.
While management cannot predict if or when additional future goodwill or long-lived asset impairments may occur, additional impairments could have material adverse effects on the Company’s operating income, net assets, and/or the Company’s cost of, or access to, capital.
Risks Related to Our Products and Technologies and Competition
TV streaming is highly competitive and many companies, including large technology and entertainment companies, TV brands, and service operators, are actively focusing on this industry. If we fail to differentiate ourselves and compete successfully with these companies, it will be difficult for us to attract or retain subscribers and our business will be harmed.
TV streaming is increasingly competitive and global. Our success depends in part on attracting and retaining subscribers on, and effective monetization of, our platform. To attract and retain subscribers, we need to be able to respond efficiently to changes in consumer tastes and preferences and to further increase the type and number of content offerings. Effective monetization requires us to continue to update the features and functionality of our streaming platform for subscribers and advertisers.
Companies such as DirecTV, Comcast, Cox and Altice, along with virtual multichannel video programming distributors, such as YouTube TV, DirecTV, Philo and Sling TV, offer TV streaming products that compete with our platform. In many cases, these competitors have the financial resources to subsidize the cost of their streaming services in order to promote their other products and services making it harder for us to acquire new subscribers and increase hours streamed. Similarly, some service operators, such as Comcast and Altice, offer TV streaming applications as part of their cable service plans and can leverage their existing consumer bases, installation networks, broadband delivery networks and name recognition to gain traction in the TV streaming market. Some of these companies also promote their brands through traditional forms of advertising, such as TV commercials, as well as Internet advertising or website product placement, and have greater resources than us to devote to such efforts.
In addition, many TV manufacturers, such as Roku, Inc., Amazon.com, Inc., LG Electronics Inc., Samsung Electronics Co., Ltd. and VIZIO, Inc., offer their own TV streaming solutions pre-installed on their TVs. Other devices, such as Microsoft’s Xbox and Sony’s PlayStation game consoles and many DVD and Blu-ray players, also incorporate TV streaming functionality.
We expect competition in TV streaming from the large technology companies and service operators described above, as well as new and growing companies, to increase in the future. This increased competition could result in pricing pressure, lower revenue or the failure of our platform to gain or maintain broad market acceptance. To remain competitive, we need to continuously invest in product development and marketing. We may not have sufficient resources to make additional investments needed to maintain our competitive position. In addition, many of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical, sales, marketing and other resources than us, which provide them with advantages in developing, marketing or servicing new products and offerings. As a result, they may be able to respond more quickly to market demand, devote greater resources to the development, promotion and sales of their products or the distribution of their content, secure more favorable rates for their content, and influence market acceptance of their products better than we can. These competitors may also be able to adapt more quickly to new or emerging technologies or standards and may be able to deliver products and services at a lower cost. New entrants may enter the TV streaming market with unique service offerings or approaches to providing video. In addition, our competitors may enter into business combinations or alliances that strengthen their competitive positions. Increased competition could reduce our market share, revenue and operating margins, increase our operating costs, harm our competitive position and otherwise harm our business.
If the advertisements and audience development campaigns and other promotional advertising on our platform are not relevant or not engaging to our subscribers, our growth in subscribers, advertisers and hours streamed may be adversely impacted.
We have made, and are continuing to make, investments to enable advertisers to deliver relevant advertising content to subscribers on our platform. Existing and prospective advertisers may not be successful in serving ads and audience development campaigns and sponsoring other promotional advertising that lead to and maintain user engagement. Those ads may seem irrelevant, repetitive or overly targeted and intrusive. We are continuously seeking to balance the objectives of our subscribers and advertisers with our desire to provide an optimal user experience, but we may not be successful in achieving a balance that continues to attract and retain subscribers and advertisers. If we do not introduce relevant advertisements, audience development campaigns and other promotional advertising or such advertisements, audience development campaigns and other promotional advertising are overly intrusive and impede the use of our TV streaming platform, our subscribers may stop using our platform which will harm our business.
If we do not maintain an adequate supply of ad inventory on our platform, our business may be harmed.
A key source of revenue for the Company is from advertising sales. Pursuant to the commercial services agreement entered into in connection with the Business Combination, certain affiliates of Disney sell ads on behalf of the Company in exchange for a portion of ad sale revenue. As a result, a portion of our business model depends on the marketing and sale of advertising inventory across our services pursuant to such agreement. We grow ad inventory by adding and retaining content providers on our platform with ad-supported channels that we can monetize. Additionally, ad inventory may be limited by restrictive ad requirements imposed by content providers. If there are delays or shortfalls in the sale of advertising on our platforms, or if a sufficient supply of quality video advertising inventory cannot be maintained at reasonable costs to keep up with demand, our advertising revenue and business may be adversely affected. In addition, advertising spend is affected by broader macroeconomic conditions, and therefore economic downturns and recessionary fears may also negatively impact our advertising revenue. The advertising industry is highly competitive, with numerous internet streaming platforms and services, as well as traditional media, such as radio, broadcast, cable and satellite TV and satellite and internet radio. We may not be successful in maintaining or improving our fill-rates or CPMs.
Our future growth depends on the acceptance and growth of OTT advertising and OTT advertising platforms.
We operate in a highly competitive advertising industry and we compete for revenue from advertising with other streaming platforms and services, as well as traditional media, such as radio, broadcast, cable and satellite TV, and satellite and internet radio. These competitors offer content and other advertising mediums that may be more attractive to advertisers than our streaming platform. These competitors are often very large and have more advertising experience and financial resources than we do, which may adversely affect our ability to compete for advertisers and may result in lower revenue from advertising. If we are unable to increase our revenue from advertising by, among other things, continuing to improve our platform’s capabilities to further optimize and measure advertisers’ campaigns, increase our advertising inventory and expand our advertising sales team and programmatic capabilities, our business and our growth prospects may be harmed. We may not be able to compete effectively or adapt to any such changes or trends, which would harm our ability to grow our advertising revenue and harm our business.
Many advertisers continue to devote a substantial portion of their advertising budgets to traditional advertising, such as linear TV, radio and print. The future growth of our business depends on the growth of OTT advertising, and on advertisers increasing their spend on advertising on our platform. Although traditional TV advertisers have showed growing interest in OTT advertising, we cannot be certain that their interest will continue to increase or that they will not revert to traditional TV advertising, especially if our customers no longer stream TV or significantly reduce the amount of TV they stream. If advertisers, or their agency relationships, do not perceive meaningful benefits of OTT advertising, the market may develop more slowly than we expect, which could adversely impact our operating results and our ability to grow our business.
We may not be successful at expanding our content to areas outside our current content offering and even if we are able to expand into other content areas and sustain such expansion, we may not be successful in overcoming our reputation as primarily a live sports streaming service.
Likewise, our system for predicting subscriber content preferences is based on advanced data analytics systems and our proprietary algorithms. We have invested, and plan to continue to invest, significant resources in refining these technologies; however, we cannot assure you that such investments will yield an attractive return or that such refinements will be effective. The effectiveness of our ability to predict subscriber content preferences depends in part on our ability to gather and effectively analyze large amounts of subscriber data. Our ability to predict content that our subscribers enjoy is critical to the perceived value of our platform among subscribers and failure to make accurate predictions could materially adversely affect our ability to adequately attract and retain subscribers and sell advertising to meet investor expectations for growth or to generate revenue. We also utilize third-party technology to help market our service, process payments, and otherwise manage the daily operations of our business. If our technology or that of third parties we utilize in our operations fails or otherwise operates improperly, including as a result of “bugs” in our development and deployment of software, our ability to operate our service, retain existing subscribers and add new subscribers may be impaired. Any harm to our subscribers’ personal computers or other devices caused by software used in our operations could have an adverse effect on our business, results of operations and financial condition.
人工智能與機器學習技術複雜且發展迅速，我們在行業內不僅面臨來自其他企業的激烈競爭，還不得不應對不斷變化的監管環境。這些努力，包括新產品的推出或現有產品的調整，可能會引發新的或更嚴格的政府與監管審查、訴訟糾紛、倫理爭議，以及其他各類複雜問題，從而對我們的業務、聲譽或財務表現造成不利影響。現行法規的修訂、其解釋與實施方式的調整，或是全新監管規定的出臺，都可能制約我們對人工智能與機器學習技術的運用，同時加大該領域研發工作的負擔與成本。以歐洲爲例，歐盟《人工智能法案》（簡稱「EU AI Act」）已於2024年8月正式生效，並在歐盟市場構建了一套全面且基於風險的AI治理框架，其中大部分實質性要求將在兩年後開始施行。該法案適用於在歐盟境內開發、使用和/或提供人工智能服務的企業，涵蓋了透明度、合規性評估與監測、風險評估、人類監督、安全性、準確性、通用型人工智能及基礎模型等多方面的要求，並擬對違規行爲處以最高達企業全球年營業額7%的罰款。此外，經修訂的《歐盟產品責任指令》於2024年12月正式生效，並將於2026年12月前轉化爲各歐盟成員國的國內法。該指令將歐盟現行的嚴格產品責任制度擴展至人工智能與機器學習技術領域，爲因AI引發的損害事件提供了更爲便捷的民事索賠途徑。待上述兩項法規全面落地後，它們將對歐盟人工智能的監管方式產生重大影響；加之相關指導性文件與裁決的陸續出臺，這些因素或將影響我們對人工智能的運用，以及我們提供並優化服務的能力，迫使我們採取額外的合規措施、對運營與流程進行調整，導致合規成本上升，並可能增加針對我們的民事索賠數量，進而對我們的業務、運營及財務狀況帶來不利影響。
The quality of our customer support is important to our subscribers, and if we fail to provide adequate levels of customer support, we could lose subscribers, which would harm our business.
Our subscribers depend on our customer support organization to resolve any issues relating to our platform, including pricing, product and technical issues. A high level of support is necessary to acquire and retain our customers. As we rely on business process outsourcing ("BPO") providers and/or third-party providers for our customer support operations, we are presented with the challenges of effectively managing and training these third-party organizations to provide adequate support to our customers. This presents a significant challenge and risk to our overall ability in the short term to provide the level of customer support necessary and could adversely affect our ability to service new and current subscribers, which in turn could materially and adversely affect our business, financial condition and results of operations.
We may be unable to successfully expand our international operations and our international expansion plans, if implemented, will subject us to a variety of economic, political, regulatory and other risks.
We currently generate the vast majority of our revenue in the United States and have limited experience marketing, selling, licensing, running or monetizing our platform outside the United States. In addition, we have limited experience managing the administrative aspects of a global organization.
Outside of the United States, we operate in Canada, Spain, and France. We also have offices and employees based in India. While we intend to explore additional opportunities to expand our business in international markets in which we see compelling opportunities, we may not be able to create or maintain international market demand for our platform.
Operating in international markets requires significant resources and management attention and subjects us to economic, political, regulatory and other risks that may be different from or incremental to those in the United States. In addition to the risks that we face in the United States, our international operations involve risks that could adversely affect our business, including:
•differing legal and regulatory requirements, including country-specific data privacy and security laws and regulations, consumer protection laws and regulations, tax laws, trade laws, labor regulations, tariffs, export quotas, custom duties on cross-border movements of goods or data flows, extension of limits on TV advertising minutes to OTT advertising, local content requirements, data or data processing localization requirements, or other trade restrictions;
•slower adoption and acceptance of streaming services in other countries;
•the need to adapt our content and user interfaces for specific cultural and language differences, including delivering support and training documentation in languages other than English;
•our ability to deliver or provide access to popular streaming channels or content to users in certain international markets;
•different or unique competitive pressures as a result of, among other things, the presence of local consumer electronics companies and the greater availability of free content on over-the-air channels in certain countries, such as France;
•challenges inherent in efficiently staffing and managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, compensation and benefits, and compliance programs;
•political or social unrest, including the ongoing war between Russia and Ukraine, conflicts in the Middle East and economic instability;
•compliance with laws such as the Foreign Corrupt Practices Act, UK Bribery Act and other anti-corruption laws, export controls and economic sanctions, and local laws prohibiting corrupt payments to government officials;
•compliance with various privacy, data transfer, data protection, accessibility, consumer protection and child protection laws in the European Union and other international markets that we operate in;
•difficulties in understanding and complying with local laws, regulations and customs in foreign jurisdictions, including local ownership requirements for streaming content providers and laws and regulations relating to privacy, data protection and information security, and the risks and costs of non-compliance with such laws, regulations and customs;
•regulatory requirements or government action against our service, whether in response to enforcement of actual or purported legal and regulatory requirements or otherwise, that results in disruption or non-availability of our service or particular content in the applicable jurisdiction;
•adverse tax consequences such as those related to changes in tax laws or tax rates or their interpretations, and the related application of judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax liabilities given the ultimate tax determination is uncertain;
•differing legal and court systems, including limited or unfavorable intellectual property protection;
•fluctuations in currency exchange rates could impact our revenue and expenses of our international operations and expose us to foreign currency exchange rate risk;
•profit repatriation and other restrictions on the transfer of funds;
•differing payment processing systems;
•working capital constraints; and
•new and different sources of competition.
If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business and financial condition may be harmed. Our failure to manage any of these risks successfully could harm our international operations and our overall business and results of our operations.
Our operations outside the U.S. may be adversely affected by the operation of laws in those jurisdictions.
Our operations in non-U.S. jurisdictions are in many cases subject to the laws of the jurisdictions in which they operate rather than U.S. law. Laws in some jurisdictions differ in significant respects from those in the U.S. These differences can affect our ability to react to changes in our business, and our rights or ability to enforce rights may be different than would be expected under U.S. law. Moreover, enforcement of laws in some overseas jurisdictions can be inconsistent and unpredictable, which can affect both our ability to enforce our rights and to undertake activities that we believe are beneficial to our business. In addition, the business and political climate in some jurisdictions may encourage corruption, which could reduce our ability to compete successfully in those jurisdictions while remaining in compliance with local laws or U.S. anti-corruption laws applicable to our businesses. As a result, our ability to generate revenue and our expenses in non-U.S. jurisdictions may differ from what would be expected if U.S. law governed these operations.
We depend on highly skilled key personnel to operate our business, and if we are unable to attract, retain, and motivate qualified personnel, our ability to develop and successfully grow our business could be harmed.
We believe that our future success is highly dependent on the talents and contributions of David Gandler, our Co-Founder and Chief Executive Officer, other members of our executive team, and other key employees, such as engineering, finance, legal, research and development, marketing, and sales personnel. Our future success depends on our continuing ability to attract, develop, motivate, and retain highly qualified and skilled employees. All of our employees, including our senior management, are free to terminate their employment relationship with us at any time, and their knowledge of our business and industry may be difficult to replace. Qualified individuals are in high demand, particularly in the digital media industry, and we may incur significant costs to attract them. We use equity awards to attract talented employees, but if the value of our Class A Common Stock declines significantly and remains depressed, that may prevent us from recruiting and retaining qualified employees. If we are unable to attract and retain our senior management and key employees, we may not be able to achieve our strategic objectives, and our business could be harmed. In addition, we believe that our key executives have developed highly successful and effective working relationships. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees. If one or more of these individuals leave, we may not be able to fully integrate new executives or replicate the current dynamic and working relationships that have developed among our senior management and other key personnel, and our operations could suffer.
The impact of worldwide economic conditions may adversely affect our business, operating results, and financial condition.
Our financial performance is subject to worldwide economic conditions, including inflation trends, and their impact on levels of advertising spending. Expenditures by advertisers generally tend to reflect overall economic conditions, and to the extent that the economy continues to stagnate, reductions in spending by advertisers could have a material adverse impact on our business. Historically, economic downturns have resulted in overall reductions in advertising spending.
Economic conditions may adversely impact levels of consumer spending, which could adversely impact the number of subscribers to our platform. Consumer purchases of discretionary items generally decline during recessionary periods and other periods in which disposable income is adversely affected. To the extent that overall economic conditions continue to reduce spending on discretionary activities, our ability to retain current and obtain new subscribers could be hindered, which could reduce our revenue and negatively impact our business.
Changes in how we market our service could adversely affect our marketing expenses and subscription levels may be adversely affected.
We utilize a broad mix of marketing and public relations programs, including social media sites, to promote our service and content to existing and potential new subscribers. We may limit or discontinue use or support of certain marketing sources or activities if advertising rates increase or if we become concerned that subscribers or potential subscribers deem certain marketing platforms or practices intrusive or damaging to our brand. If the available marketing channels are curtailed, our ability to engage subscribers and attract new subscribers may be adversely affected.
Companies that promote our service may decide that we negatively impact their business or may make business decisions that in turn negatively impact us. For example, if they decide that they want to compete more directly with us, enter a similar business or exclusively support our competitors, we may no longer have access to their marketing channels. We also acquire a number of subscribers who re-join our service having previously canceled their subscription. If we are unable to maintain or replace our sources of subscribers with similarly effective sources, or if the cost of our existing sources increases, our subscription levels and marketing expenses may be adversely affected.
We utilize marketing to promote our content, drive conversation about our content and service, and drive viewing by our subscribers. To the extent we promote our content inefficiently or ineffectively, we may not obtain the expected acquisition and retention benefits and our business may be adversely affected.
We have pursued and may in the future engage in strategic transactions, including acquisitions and investments, which involve a number of risks, and if we are unable to address and resolve these risks successfully, such acquisitions and investments could harm our business.
From time to time, we acquire or invest in businesses, products or technologies, or partner with other companies, to expand our offerings and capabilities, subscriber base and business. The risks associated with such strategic transactions include: the difficulty of integrating solutions, operations, and personnel; inheriting liabilities and exposure to litigation; failure to realize anticipated benefits and expected synergies; and diversion of management’s time and attention, among other risks related to strategic transactions. We have evaluated, and expect in the future to evaluate, a wide array of potential strategic transactions. Any such transaction could be material to our financial condition and results of operations. Also, any anticipated benefits from a given transaction, including, but not limited to, the Business Combination, may never materialize. In addition, the process of integrating any businesses, products or technologies acquired by us may create unforeseen operating difficulties and expenditures and we may have difficulties retaining key employees. Transactions in international markets involve additional risks, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries. We may not be successful in overcoming such risks, and such transactions may negatively impact our business. In addition, if we do not complete an announced transaction or integrate an acquired business successfully and in a timely manner, we may not realize the benefits of the transaction to the extent anticipated. Strategic transactions may contribute to fluctuations in our quarterly financial results. These fluctuations could arise from transaction-related costs and charges associated with eliminating redundant expenses or write-offs of impaired assets recorded in connection with acquisitions and investments and could negatively impact our financial results.
Risks Related to Privacy, Consumer Protection and Cybersecurity
We are subject to a number of legal requirements and other obligations regarding privacy, security, consumer protection and data protection, and any actual or perceived failure to comply with these requirements or obligations could have an adverse effect on our reputation, business, financial condition and operating results.
Various international, federal, and state laws and regulations govern the processing of personal information, including the collection, use, retention, transfer, sharing and security of the personal information we receive from and about our subscribers and other individuals. The global data protection landscape for the collection and processing of personal information, including subscriber and other consumer personal information, by online service providers, content distributors, advertisers and publishers is rapidly evolving in the United States and internationally. Privacy groups and government bodies, including the Federal Trade Commission ("FTC"), increasingly have scrutinized issues relating to the use, collection, storage, disclosure, and other processing of data, including data that is associated with personal identities or devices, and we expect such scrutiny to continue to increase. Various federal, state and foreign government bodies and agencies have adopted or are considering adopting laws and regulations limiting, or laws and regulations covering the processing, collection, distribution, use, disclosure, storage, transfer and security of certain types of information. In addition to government regulation, self-regulatory standards and other industry standards may legally or contractually apply to us, be argued to apply to us, or we may elect to comply with such standards or facilitate compliance by content publishers, advertisers, or others with such standards.
For example, in the United States, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act (collectively, the “CCPA”) requires covered businesses that process the personal information of California residents to, among other things: (i) provide certain disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information; (ii) receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt out of certain disclosures of their personal information; and (iii) enter into specific contractual provisions with service providers that process California resident personal information on the business’s behalf. Since the CCPA went into effect, comprehensive privacy statutes that share similarities with the CCPA are now in effect and enforceable in numerous states, and such laws may increase our compliance costs and exposure to liability. These laws grant consumers certain rights with respect to their personal information, have notice obligations, and require consent in some circumstances, among other things. Other U.S. states are considering adopting similar laws and regulations and there remains increased interest at the federal level as well. In some cases, the enactment of such laws has conflicting requirements that makes compliance challenging.
Additionally, our use of certain commonly used digital trackers to deliver relevant advertising to our website visitors and on our platform places us and our advertising partners at risk for claims under a number of other laws, including but not limited to the Video Privacy Protection Act ("VPPA"), the California Invasion of Privacy Act (“CIPA”), and Cal. Civil Code § 1799.3 and other state and federal laws, and we have been subject to such claims to date related to our digital advertising practices. In a recent trend, some content publishers have been engaged in litigation over alleged violations of the VPPA relating to activities on online platforms in connection with advertising provided by unrelated third parties, the results of which may impact our business. We and our content publishers and advertisers could be at risk for violation or alleged violation of these and other laws, regulations, and other standards and contractual obligations relating to privacy, data protection, and information security. More generally, the FTC and various state regulatory agencies are aggressively investigating and bringing enforcement actions that are focused on companies' collection, use, processing and sharing of consumer data, such as browsing information, for various uses, including but not limited to advertising.
In the European Economic Area ("EEA"), the European Union General Data Protection Regulation ("GDPR") imposes stringent obligations relating to data protection and security for processing the personal information of individuals within the EEA or in the context of our activities within the EEA. Further, since the beginning of 2021, after the end of the transition period following the departure of the United Kingdom (“UK”) from the EU, the UK has created a separate regime with similarly onerous obligations under the United Kingdom General Data Protection Regulation and Data Protection Act 2018 (collectively, the “UK GDPR”). The GDPR and UK GDPR each authorize regulators to impose sanctions, including changes to data processing, and each allow for fines of up to 4% of the global annual revenue or €20 million (£17.5 million) of a noncompliant undertaking, whichever is greater, for certain violations. In addition to fines, a breach of the GDPR or UK GDPR may result in regulatory investigations, reputational damage, orders to cease/ change our data processing activities, enforcement notices, assessment notices (for a compulsory audit) and/ or civil claims (including class actions).
As a result of intellectual property infringement claims, or to avoid potential claims, we have previously chosen to, and may in the future choose or be required to, seek licenses from third parties. These licenses may not be available on commercially reasonable terms, or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees, royalties or other consideration, and the rights granted to us might be nonexclusive, with the potential for our competitors to gain access to the same intellectual property. Furthermore, an adverse outcome of a dispute may require us to pay damages, potentially including treble damages and attorneys’ fees, if we are found to have willfully infringed another party’s intellectual property. We may also be required to cease making, licensing or using technologies that are alleged to infringe or misappropriate the intellectual property of others, and as a result may need to expend additional development resources to redesign our solutions; enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies, content or materials; and to indemnify our partners and other third parties. The inability to obtain intellectual property rights or licenses on favorable terms, or the need to engage in litigation related to these matters, may materially impact our business and financial condition.
An inability to obtain licenses for our streaming content from suppliers or other rights holders could be costly and harm our business.
The conditional conversion feature of all or a portion of the 2029 Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
In the event the conditional conversion feature of any or all of the 2029 Convertible Notes is triggered, holders of the 2029 Convertible Notes will be entitled to convert their 2029 Convertible Notes at any time during specified periods at their option. If one or more holders elect to convert 2029 Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A Common Stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our liquidity. In addition, even if holders of the 2029 Convertible Notes do not elect to convert their 2029 Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2029 Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
Provisions in the indenture for the 2029 Convertible Notes may deter or prevent a business combination that may be favorable to you.
If few securities or industry analysts publish research or reports, or if they publish adverse or misleading research or reports, regarding us, our business or our market, our stock price and trading volume could decline.
The trading market for our Class A Common Stock will be influenced by the research and reports that securities or industry analysts publish about us, our business or our market. If few securities or industry analysts commence coverage of us, the stock price would be negatively impacted. Additionally, if any of the analysts who currently cover us or initiate coverage on us in the future issue adverse or misleading research or reports regarding us, our business model, our intellectual property, our stock performance or our market, or if our operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
We maintain insurance that we believe is customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure. Moreover, any loss incurred could exceed policy limits and policy payments made to us may not be made on a timely basis. Such losses could adversely affect our business prospects, results of operations, cash flows and financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds