An increase in the price of Philo, a small but growing streaming service, changes the metrics of the cord cutting world a bit and might be a signal that the service itself is not prospering despite its almost cult-like popularity. In a letter to subscribers the CEO described the need for the increase, which we breakdown at the end of this story.
The service which is known as the streaming option that eschews sports and major cable news to save on pricing apparently is finding it difficult to maintain its current offering at the price structure that it launched with. Namely the $16.00 offer. Philo has not released numbers to illustrate this, but if it felt that enough people were choosing the $20.00 plan in the first place it would not be eliminating access to the less expensive and less expansive package.
The majority of streaming services offer more than one plan with Sling TV leading the way in terms of customization and Hulu, like Philo offers one package at $44.99. What is the difference between Hulu’s approach and Philo’s? Hulu started with one package in the first place.
Some might call Philo’s strategy simply consolidating. Here’s what I think is happening. Given the choice between the $16 package and the $20 package, people are choosing the $16 package. This means less revenue for Philo to pay for all of the channels that it offers in the first place.
While there is definitely an appeal for an inexpensive TV package that doesn’t include Sports and news I have always felt that this was really niche. On one hand it allows the package to be cheaper for the company to put together. On the other hand it means only people who really don’t like sports and news may even count themselves as considering the package in the first place.
The numbers show consistently that live sports brings in the highest ratings of anything on TV on a consistent basis. So for all of the people you know who say I don’t care about football and basketball and so on the numbers say that more people do then don’t. Trust me, I know a lot of people who don’t care for sports.
In today’s streaming market there are not a lot of ways to track apps other than quarterly reports, but one way to peek at interest is ratings on app stores. And the numbers tell a tough story. For instance on Roku’s platform Philo has 11,323 ratings. That’s respectable compared to thousands of channels on Roku. But DirecTV Now on the other hand has 84,096 ratings. On Amazon Philo has 2,284 ratings in the Fire TV apps category, DirecTV Now has 5,777. I chose DirecTV now for the comparison because it has been reportedly struggling lately. When it comes to the leader in this space Sling TV has 306,265 ratings on Roku.
Philo has played it very smart as it has rolled out starting only on Roku before expanding to other platforms. It has a definite place in the market. But digging through the statements made by their CEO it reads like somebody putting a positive spin on not making enough money. While some companies like Dish or AT&T can operate at a loss with streaming programs in the anticipation that one day they will be the dominant force there is not nearly as much room for startups to make it in that place.
Reading between the Lines of the Letter from Andrew McCollum
(original text is italicized our interpretation is Bold)
Hi, Andrew here, CEO of Philo.
I wanted to let you know about an upcoming change to Philo and explain some of the thinking behind it. Starting May 6, we will move to only offering our $20 package to new subscribers. If you’re a current subscriber or subscribe before that date, then nothing will change — you’ll continue to have the same package and price options you have today.
For the moment we will keep you at the rate you originally signed up for but like Netflix and other companies eventually we will drop the cheaper plan altogether.
At Philo, we care deeply about creating the best TV experience possible at an affordable price.
And we have found that it is not affordable for us to keep offering the cheap package because people are choosing it instead of the 20 dollar package and hurting our bottom line.
Since we launched 18 months ago, most of the other companies in our space have raised their prices, in some cases multiple times. We didn’t want to do that. Still, when we looked at all of the costs of operating Philo — which increase over time — consolidating into a single $20 package was the best way for us to maintain the same offering we have today without raising prices for everyone, or having to cut back in places we strive to excel, like our customer support.
We are still new to this game and we hoped to create buzz and momentum early with a low price and somewhat unique idea, but now that time is over. It’s not us, it’s society forcing our hand and we are really no worse than all of the other companies, but not unique in our approach either. Like others we are trying to sell this on the idea that the increase will be reinvested into the customer experience. Really though its about rate increases and trying to stay afloat in a competitive marketplace dominated by more well funded companies.
Again, nothing is changing for anyone who has already subscribed by May 6 — you will keep the package you have and will continue to be able to switch between our two existing packages. On behalf of the team at Philo, I want to thank you for watching with us.
Don’t say we didn’t warn you when you only have one option to sign up for after friends encouraged you to sign up for almost 2 years.