Philo is one of those online services that, at first glance, seems destined to struggle: At a time when sports and political news programming still draws the most eyeballs on cable and satellite, Philo tries to sell customers on a single, low-cost package of five dozen cable networks, none of which carry live sports or political news.
It is an outlier in the growing space of online multi-channel video programming distributors (MVPD) — another fancy acronym for “pay television” — that are attempting to offer an alternative to traditional cable and satellite television service with comparable channels at cheaper prices. Almost every streaming service that has tried to shake up the industry with a streaming product has, inevitably, raised their subscription price as network programmers begin to demand the same carriage deals that drove up the price of cable and satellite in the first place.
But not Philo. When it launched in 2017, the company decided not to deal with programmers that bundle entertainment networks with expensive sports and news. Instead, it chose to focus on general entertainment, lifestyle and knowledge networks, a move that allowed it to initially offer its service for $20 a month (a cheaper tier at $16 a month with fewer channels was eliminated in 2019 after the company found most customers were willing to pay the extra $4 a month). The price undercuts most of its closest cable alternative competitors.
Only recently did the cost of programming catch up with Philo: In May, the company said it would raise the cost of its service to $25 a month. Such a move normally draws outrage from customers of other streaming services. But Philo’s 800,000-plus subscribers mostly brushed it aside. And the service continues to grow.
Andrew McCollum, Philo’s chief executive, says the company works really hard to add programming and features while keeping costs low. But some factors beyond its control may challenge that mission: Philo’s core programming partners — ViacomCBS, Discovery Communications, A+E Networks and AMC Networks — are also counted as investor-owners of the company. Two of those companies have grown in size — Viacom merged with CBS in 2019, and now includes channels in its portfolio that Philo has yet to carry; Discovery is expected to merge with AT&T’s WarnerMedia next year, bringing channels like CNN, the Cartoon Network and TBS into the mix with the Discovery Channel and Animal Planet. And three of those companies — Discovery, AMC Networks and ViacomCBS — now offer one or more streaming services of their own that compete with Philo for consumer dollars.
The Desk recently caught up with McCollum to discuss how media’s mega-mergers will impact Philo and its customers in the near future and whether the service feels it can compete against the subscription offerings of its investor-owners. McCollum also spoke about how Philo’s partnership with T-Mobile came together, the company’s philanthropic endeavors, and new programming and features that are coming soon.
This interview has been lightly edited for clarity and flow.
Matthew Keys, The Desk: I think it was about a year ago when we did our first interview, and you guys have done quite a bit since then. When we last spoke, it was looking like each one of your primary investor-owners [ViacomCBS, Discovery Communications, AMC Networks, A+E Networks] was in the process of coming out with their own direct-to-consumer streaming product. At that time, it was just ViacomCBS, which had CBS All Access. But now, you know, Discovery is in that space — they have A+E Network content. AMC has AMC Plus. And ViacomCBS obviously has Paramount Plus, Pluto TV and Showtime. So with all of those direct-to-consumer products that are now on the market, give me your best pitch to a prospective customer as to why they should subscribe to Philo. What value does Philo add to a customer’s experience compared to those direct-to-consumer streaming products?
Philo CEO Andrew McCollum: I think live TV is still very compelling. It’s still used by tens of millions of households on a regular basis, and a lot of great content still comes first to live TV. And there’s an incredible breadth of things that are available on live TV. With Philo, you get more than just the live experience. You also get DVR — we just expanded our DVR to make that piece of it more-compelling. And we also have a very extensive on-demand library. We have around 60,000 titles — we expanded out that number when we brought Crackle into the service recently.
So you get the best of both worlds together, and you get it from a wide variety of content sources. Rather than paying for Paramount Plus, Discovery Plus, AMC Plus, Disney Plus, Netflix and so on, you can pay one really fair price, get access to a great selection of live and on-demand general entertainment, lifestyle and knowledge content, and get access to an amazing breadth of on-demand content as well.
So I think it’s a really great value, and I think that was one thing we started to see really consistent from subscribers — people feel like Philo is a really fair price. We went more than three years without raising our price, and even when we did it, I think people still kind of saw it as a pretty good deal.
The Desk: And on the point of one of those direct-to-consumer streaming products, a while back, you said on Reddit that Philo is still trying to figure out how to bring AMC Plus on board. Are those conversations still happening?
Philo CEO McCollum: Yes, for sure. I’d say that, broadly speaking, our point-of-view is that, right now, you have these different categories of video consumption. Often, each category has its own silo. You have ad-supported like Pluto TV and [Comcast-owned] Xumo and the Roku Channel. You have the traditional linear experiences like YouTube TV and [Walt Disney Company-owned] Hulu with Live TV.
Hulu with Live TV is maybe the best example of live TV and subscription video on-demand content together. But, largely, it exists in separate apps with separate interfaces, and people are talking about them as separate categories. We think that’s pretty artificial, and that it doesn’t really match how people want to consume video entertainment content. We’d like to bring all of those different things to Philo.
So, we’d like to have some content that’s ad-supported. And then we’d like to have content that’s delivered through the traditional linear experience. And then, also, for people who want to go even deeper in some category of content or are willing to pay a little more to lose advertising interruptions, have access to those “plus” services.
I think those things are really meant to go together, and they all reinforce each other. We now have [Starz and Epix] on Philo, but we just recently brought in some of the free, ad-supported networks like Crackle. They’re still part of the base package — you have to be a subscriber to get them — but that’s something we’ll experiment with. And we’re still interested in doing deals with the “plus” services, like AMC Plus, to give our customers those options as well.
The Desk: I don’t want to get too much into the price increase, because I think that’s been written about enough. And I think consumers generally understand the reasons behind that — I think it’s pretty obvious. But what surprised me about your recent price increase is how your customers seemed to absorb it, in that they mostly shrugged it off. And that surprised me because when Netflix or Disney Plus raise their monthly fee by $1, people seem to lose their shit. So what do you owe that to? Why did customers shrug off the price increase? Were you surprised by that as well?
Philo CEO McCollum: I wouldn’t say we were surprised, but we were really encouraged and really thankful that people seemed to receive how that decision was made. We put a lot of thought into how we were going to do it, and we put a lot of thought into the timing of it.
To be honest, we actually delayed the price increase a bit. We didn’t want to raise the price on our customers while the country was still really deep into a recession caused by the [COVID-19] pandemic. A lot of people were out of work. A lot of people were financially-challenged. We thought it would be really insensitive to raise our price at that time. Some of our competitors did raise prices. But we just felt like that was the wrong time to do it.
But beyond the timing, we thought a lot about how we could do it in a way that was as fair as possible to our existing customers, and how we could make new customers feel we weren’t just raising prices. And that led us to two decisions.
One, if you’re already subscribed, you can keep your existing plan at your existing rate. And I think customers really appreciated that. No one else generally does that — they just raise the price for everybody. But we felt like that was a real important fairness principle to bring to our existing subscribers.
Two, expanding the cloud DVR is a really significant value-added feature. We already had a really strong DVR offering compared to a lot of other companies in the space, and some of them charge for the cloud DVR feature — charge extra to access, or charge for additional recording time. We’ve always included it, but we wanted to take it one step further and expand the availability of programs from 90 days to one year, which I now believe is the most-robust DVR offering that anyone offers for any kind of TV service.
Both of those things really helped people feel like, okay, yes, the price is going up, but you’re also getting a better value from the service. So I think, given that we put a lot of thought into it, it was nice to see people appreciate the approach that we took.
We do put a lot of time and energy into creating a service where people feel like we are treating them fairly. It’s part of why we really did everything we could do to avoid raiding prices for three and a half years.
I think that’s just our entire ethos. As a company, we want to have an honest, fair, authentic relationship with our subscribers — from customer support to our approach with marketing, or even things like price increases. We really try to be thoughtful and put our customers first in our thinking.
The Desk: Part of your company’s character goes beyond your approach to customer service. Philo is gaining a reputation as a philanthropic organization. There was an initiative last year where you donated $1 million of advertisement inventory to Black-owned businesses, at a time when social issues were really in the front of people’s minds, as they continue to be today. So how important are social and philanthropic initiatives to you? And what can people expect to see along those lines coming from Philo in the future?
Philo CEO McCollum: That’s a great question, and thanks for noticing that and remembering that.
You know, we’re a startup in a space with a bunch of behemoths. And we’re trying to build out our business, but we also want to be really thoughtful about the impact that we’re having, and trying to make that impact as positive as possible. It really comes back to what I was just talking about, in terms of creating a product and a service that people really love, where they feel it’s a different kind of relationship with the company that they’re working with.
We don’t just think of our customers as numbers or dollars coming into the bank. We actually try to be really thoughtful about how we can create something that’s a really great value, and that people really appreciate, and we try to have a different kind of relationship around that. In order to do that, we have to build a company of people who really love what they do, and who really care about that stuff, and really care about making a great product and a great experience for our customers.
That kind of informs a lot of how we organize ourselves as a team, as a company. It really comes down to, we have a real philosophy of putting our team first, putting other people at our company first, our customers first. We avoid thinking about short-term profits and short-term business drivers. Instead, we think a lot about how we can do the right thing.
If we treat our customers well, we build a great product, we treat our team well, and we support people both inside our company and outside, that’s going to lead us to building the most-successful business.
Part of our philanthropic focus is saying, you know, part of loving what you do at Philo is feeling like the things we care about as a company — our values, our principles — are not simply reflected in our product, it’s also reflected through the opportunities we have as a company to influence the world in a positive way.
So, we have ad inventory. And we can make that available to others, and use that in a way that has a positive impact. So we’ve been thinking about the best way to do that, even if it’s not necessarily going to improve our bottom line of the business. As we continue to scale up and grow, we’ll continue to find more of those opportunities. We want to tap into those opportunities in a way that reflects our principles and our values, even if it’s not driven by some kind of business objective.
To that point, we’re continuing our program of donating ad inventory to social justice causes and other philanthropic causes. We’re continuing that into this year. And we’re trying to find ways to expand on that and make it work even better for those organizations.
We’ve had a number of partnerships and programs, internships and digital marketing seminars, where we’ve been able to share our knowledge that we may have or build out different types of connections. We’ve discussed internally other philanthropic initiatives that we may pursue, but I don’t think we’re ready to announce any of them.
We did donate another $1 million of advertisement impressions to social justice causes. We expanded that group to other underprivileged groups, including LGBTQ+ organizations, native and indigenous people groups, the Hispanic Foundation, and a few others. The BFTA Collective, the Transgender District of San Francisco, the Equality Federation, veterans groups like the Wounded Warrior Foundation, and others. So we’re really trying to expand our reach, while still making sure that we’re impacting social justice causes.
The Desk: So that’s a total of $2 million over the last year, if my math is correct, right?
Philo CEO McCollum: Yep, correct. That initiative should end at the end of [June 2021]. The second $1 million.
I imagine that we’ll renew it, so I expect that the number by the end of this year will be significantly more than an additional $1 million. But we’re doing this in phases, dividing it into chunks of the year, and constantly re-evaluating ourselves.
The Desk: Shifting back to programming, our interview last year took place when the Viacom Corporation and CBS Corporation merger was still fresh, and we discussed the possibility of Philo having to negotiate a deal that brought on the CBS portfolio of broadcast and cable channels. Now we have another media merger looming — the potential merger between AT&T’s WarnerMedia and Discovery Networks. Now, on top of the possibility of having to add the CBS portfolio of channels, you’re staring down the possibility of having to add the Turner and Warner channels. How are you crafting your long-term strategy around having to possibly negotiate those deals?
Philo CEO McCollum: That is an area where it’s really hard to predict how these things will play out. Negotiating these programming deals is a long and complicated process that involves a lot of different strategic considerations on both sides.
A lot of other streaming TV services have homogenied over time. If you look back, when we first launched, there was a lot more variability between the focus on the different services. Some, like Fubo TV, were really focused on sports. Some offered a broader selection of channels, but they still focused — YouTube TV didn’t have Discovery or Viacom, for example. Sling had their Orange and Blue packages, which had more difference then compared to now. Over time, things have become less differentiated. Fubo TV has added more channels, YouTube TV has added more channels, Hulu with Live TV has added a bunch of channels.
Philo has, notably, not done that. We’ve largely stayed true to our original strategy of offering a differentiated package — trying to offer something that customers couldn’t really get anywhere else. I mean, there was AT&T Watch TV, but that closed down. And then there was T-Mobile Vibe for a little while, but that’s gone away as well.
We’re still around, and I think our strategy has a huge upside for our programming partners. There’s a large segment of people who really love the package we offer. If we didn’t offer it, customers would have to choose one of these more-expensive, much larger packages, and they’d probably just go without TV service. That, and the data we see from our customers, really confirms that we’re on the right track.
We’ll continue to pursue the idea that we want to provide something that’s differentiated from the rest of the market, a service that is a great value to subscribers. We don’t want to have to create a service that just looks like the same thing everybody else has, or that includes a bunch of content people feel aren’t offered at a great value. So that will be a cornerstone of how we approach these negotiations.
I think our programming partners understand this. And I think they realize that it’s not in their best interest to force Philo to become another YouTube TV or Hulu with Live TV or Fubo TV. I’m just not sure that would benefit them.
I mean, if it really comes down to it, and we’re forced to carry CBS and the Turner networks, we probably would go and do a deal with [ABC parent company] Disney and NBC [parent company Comcast], and offer a full-feature package, because it just wouldn’t make sense to offer half of the sports, broadcast and news channels. It would be a really ineffective channel lineup.
But I’m confident that we’ll be able to find something with our programmers that makes sense for both sides. It’s hard to speak about some of the specific deals until they come up, because no one knows how they’re going to go. But that’s largely what I think is going to happen.
The Desk: You mentioned T-Mobile Vibe, and that got me thinking about how T-Mobile forged a deal with Philo to provide customers with discounted access to your service [and Google-owned YouTube TV] when they decided to shut down their own streaming service. How did that deal come together and — perhaps more importantly — has it helped Philo reach the milestone of one million subscribers?
Philo CEO McCollum: There’s a couple of different aspects to the T-Mobile deal. The first is, the folks there were really open about their reasons for making the shift away from pay television. When they launched, with the packages that they launched with, there were some interesting negotiations with the content owners that were eventually made public. And, as a result, T-Mobile had to change how their service was offered. Second, their technology partner, Mobi TV, ran into some pretty public financial difficulties around the same time.
Ultimately, I think T-Mobile had to decide if they wanted to continue keeping that service afloat or re-assembling it from the ground up? And that was likely a big challenge for them. As anyone knows in this space, creating a new TV service is not an easy thing to do. It’s hard. Others have taken a crack at it and found it to be too challenging to really make it a successful business.
Anyway, there’s a number of reasons why the T-Mobile deal made a lot of sense. Like us, T-Mobile’s approach is focused on customers, and like us, they’re also trying to figure out how they can build a different kind of relationship with customers, how they can deliver great value for their customers, how they can put their customers first.
There’s a big overlap in how we think about things, and we feel like T-Mobile is an ideal partner. We’d actually been talking with them for years before we were able to land on the deal that we recently announced. It’s always been a big interest of ours to find a way to work closely with them, and we’re really happy that we were able to put something together. It’s been a great partnership.
And it’s a good partnership for our customers, too. You can get $10 off Philo, which until recently was 50 percent off, but even with the price increase, it’s still 40 percent off. It’s an amazing bargain if you’re a T-Mobile customer. And it’s positive for our growth and retention as well.
We haven’t announced crossing a million subscribers, but I’m sure we’ll let you know when we’re ready to make that announcement.
The Desk: Will you let me know first?
Philo CEO McCollum: We will probably let you know at the same time as other people, I’m guessing. That’s more of a question for our communications team.
I’ve really pushed over time to be more public about our number of subscribers. I don’t really know why there’s a lot of secrecy around this, from all these other player in the space. I think we are being a little bit more standoff-ish now, just because we’re so close to the big milestone.
But in general, I think that I would be in favor of us trying to make that number a little more public. I’ve argued we should have a public dashboard on the website where people just go and see how many subscribers we have. Some of our partners are not quite ready to embrace that level of transparency. But we really try to be transparent about a lot of what we do, and I’m always looking for more ways we can share more with people about how we think about things, how things are going for the company, how we approach things. We want to be open with what we’re doing. It’s part of what allows us to build the relationship we have with our customers, with writers like you. It helps us strategize. Keeping things secret, weaponizing information, trying to “shape the narrative” — it’s just not really our approach as a company.
The Desk: Sure, but I also remember, last time we spoke, you expressed concern that if others realized how successful you were, that there would be some emulation in the space. And for a brief moment, we saw that emulation at T-Mobile. Ultimately, they threw in the towel, because, as you pointed out, starting up a TV business is hard. It seemed like, they figured if they came in with an attitude of wanting to shake up the cable and satellite space, they could do something different. But it was harder than they realized.
Philo CEO McCollum: Yeah, and we’ve seen other companies try to emulate what we’re doing — AT&T Watch TV, and T-Mobile Vibe, and there have been others. And there are risks about being public and vocal about your success. We get the occasional call from a patent troll and people threatening frivolous lawsuits, that kind of stuff. It’s just a distraction from what we’re really trying to do. That is the downside of being successful.
But, in general, I still want us to be a company where we can be as open as possible, even if there are downsides. I’ve made the argument that we should just be open about it. And I realize I’m contradicting myself by not sharing subscriber count, but that’s just my overall, general point of view on this.
The Desk: I get it. Back to programming, the Spanish-language streaming demographic seems to be really underserved in the market. Are there conversations about adding Spanish-language programming to Philo?
Philo CEO McCollum: Definitely. It’s on the short list of an add-on packages that we want to bring to market. We do have the ability to offer some Spanish-language networks through our existing programming agreements, but we just want to make sure that we are creating an offering that meets the bar of being a good value and having enough content to be compelling to subscribers. We’re still figuring out what exactly that would need to be, but it’s certainly something we’re quite excited to bring to market.
The Desk: Are there any additional features coming to Philo down the line? You revealed on Reddit that Philo is working on a picture-in-picture feature that has been highly requested from users. Is that still coming?
Philo CEO McCollum: We’ve started to roll out some functionality on the web version of Philo, and we’re expanding the functionality around our Philo Connect feature where you can control the TV experience with your phone, or the web version of Philo with your phone — users being able to use one device to act as a remote for another device, or devices.
Philo Connect is important because it will provide some of the technical underpinning for other stuff we want to do down the road, like shared viewing, watch party kind of things. I think there’s a bunch of exciting stuff we’re working on. We’re in the process of re-designing the program guide. And there’s a bunch of other projects happening simultaneously.
We typically release things when they’re ready. We try to bring new features to all of our platforms quickly, but usually they’re not ready for a simultaneous launch. So often times, we’re launching things without doing a big press announcement, because if someone accesses a new feature on one platform, we don’t want to make people on other platforms trying to access the same feature, only to find out that they can’t.
There’s definitely things people have been waiting for, that we’re excited to reveal soon.
The Desk: I appreciate the considerable amount of time you’ve been willing to share with my readers. If I’m being honest, I’m still a little concerned that Philo is being edged out by these direct-to-consumer streaming services that largely offer some of the same programming that’s found on your linear channels. And that has me questioning Philo’s future a little bit, but I do think there’s space for Philo in the market, with the type of channels and content you offer.
Philo CEO McCollum: Well, you know, to your earlier question about who Philo is for — people know they want the Discovery Channel, and HGTV and Food Network. They like the linear experience that those networks deliver, and they like what they have to offer. Our job is to figure out how we can give people the best package of content, a really great product experience, with great support, at a fair price.
In some ways, it’s so obvious what we should do. There’s always this expectation that we have to give people a flashy answer. But you know, at the end of the day, it really is just about getting the basics right, and doing it in a really fair and reasonable way where customers feel like they’re being treated well. I know that sounds really boring, but being fair, being reasonable, treating customers well — that’s what our company is all about. •
Correction: An earlier version of this interview erroneously stated that Mobi TV was a technology partner of Philo. The mistake was based on a transcription error.
