Philo’s donation of $1 million in ad inventory is a big deal

The move shows financial strength in a company that's barely three years old — and helps teach the old media guard some new tricks about long-term goodwill.
The logo of Internet cable TV alternative Philo. (Image: Philo/Graphic, The Desk)

Wallet-friendly live streaming TV service Philo grabbed headlines in marketing and tech blogs last week after a public relation’s campaign that pointed to the company’s decision to donate $1 million in advertisement inventory to Black-owned businesses and associated charities.

Their philanthropic move wasn’t exactly news — The Desk wrote about it over the summer after Philo quietly slipped it into an earlier press release — but the follow-up announcement included the names of the organizations that stood to benefit from the company’s charitable donation.

Among the groups to benefit are well-known organizations like the National Urban League, the Innocence Project and the United Negro College Fund along with under-the-radar companies like the designer apparel firm MessInABottle.

“In light of the recent events, we decided to use our platform as a place for good. We opened up our ad inventory space to provide space for discussions about systemic injustice, raise awareness for social good organizations, and provide Black business owners with an opportunity to promote their businesses free-of-charge,” Reed Barker, the company’s executive in charge of advertising, said in a statement emailed to reporters.

The initiative takes advantage of ad inventory that is set aside during normal ad breaks for cable, satellite and streaming media companies to insert their own commercials. The time, known within the industry as a “local insertion break,” is a way for pay TV operators like Philo to recoup some of the money charged by programmers while raising additional revenue.

The practice was popularized by Comcast, one of the biggest and most-recognized pay TV companies in the country, through its Comcast Spotlight offering. Small businesses saw Spotlight as an attractive way to advertise on cable TV networks at a hyper-local level — ads are inserted at the regional head-end where pay TV channels are received via satellite (which Comcast also owns), then distributed to homes in a coverage area.

Even in the era of search and social media ads, local insertion on pay TV is seen as a cost-effective way of reaching consumers on local cable systems. Comcast still offers these types of commercials through their Effectv subsidiary.

Other pay TV companies followed Comcast’s lead, including YouTube TV and Philo, who now offer businesses the opportunity to reach their subscribers through local ad insertions on channels they carry as part of their packages.

But Comcast and YouTube are very different from Philo — they’re companies that have spent years building up their products, including their marketing opportunities for businesses to reach their customers. It shouldn’t surprise anyone that a cable TV juggernaut like Comcast would pave the way for local ad insertions or that companies like Google — whose revenue is largely collected through targeted advertisements — would franchise the idea for pay TV over streaming.

Philo, on the other hand, is barely a decade old, and it’s only been in the consumer pay TV space for three years. At a time when most tech startups would be trying to figure out how to raise their next round of funding from venture capitalists, Philo feels confident in where it is as a growing business — so much so that the company gave away $1 million in commercial ad inventory.

Philo will make up the money in no time — the company just crossed 800,000 subscribers who are willing to pay $20 a month for a package of 60 general entertainment, lifestyle and knowledge channels, meaning the donation effectively amounts to $1.25 per paying subscriber. It isn’t clear how much of Philo’s ad inventory $1 million buys, but that’s not the point — a company wouldn’t make this bold, philanthropic move if it wasn’t confident that the money would be recouped in a short amount of time (in Philo’s case, probably one to three months).

The donation grabbed quick headlines on all the major tech, entertainment and streaming TV marketing blogs — including this one when it was announced in July — but Philo’s signaled its charity is not a one-off and that the company is rooted in philanthropy and goodwill as a long-term business strategy: In addition to the ad inventory, Philo says it is working with the National Urban League and The Gathering Spot to create a new marketing series that helps Black-owned entrepreneurs and small businesses build their personal and professional brands. Philo is also working with the Ad Council to air a revolving set of public service announcements that target racism.

“Philo is truly TV for everyone, and we want our ad presence on the platform to be uplifting and include diverse representation,” Barker said.

It isn’t just Philo that stands to benefit from the company’s goodwill gestures: The company’s philanthropic strategy helps bolster the images of it’s investor-owners — including ViacomCBS, Discovery Networks, AMC Networks and A+E Networks — and gives them a charitable roadmap to follow. That last part is especially important for Discovery, ViacomCBS and AMC Networks, each of which has either launched, or is planning to launch, a direct-to-consumer streaming offering. Philo is showing the media industry’s old guard how to react to social change and be a force for good.

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