Key Points:
- Philo is adjusting the cost of its pay TV service for some loyal, long-time customers.
- Some subscribers will be hit with a 56% price increase when their bill renews by October.
- Philo’s CEO said the company was losing money by subsidizing the lower price.
Philo is rolling out a price increase on some of its long-time customers that will have some subscribers pay as much as 56 percent more for access to premium live TV channels over the Internet, the company confirmed to The Desk this week.
On Monday, Philo began emailing affected customers a note written by its CEO Andrew McCollum explaining why the price was increasing and giving subscribers options to transition their service to another plan or cancel their subscription entirely.
When it launched as a streaming cable TV replacement in 2017, Philo initially allowed customers to choose between two packages of channels: A base plan that cost $16 per month and offered a handful of basic cable networks like AMC Network, Comedy Central, History Channel and Nickelodeon, and a $20 per month package that included niche and more-specialty digital cable networks typically relegated to higher tiers on more-expensive services.
In 2019, Philo eliminated the $16 per month plan in favor of a single, all-in-one package at $20 per month. But the service did something typically unheard of in the pay TV industry: It told long-time subscribers on the $16 per month plan that they could keep their package at the price, as long as they didn’t cancel the service. A short time later, Philo eventually dropped the smaller package and moved all subscribers to the base plan, while keeping its promise to not charge customers more than $16 per month or $20 per month, depending on which plan they originally signed up for.
In media interviews, McCollum and other Philo executives have cautioned their decision to grandfather long-time customers into older rates and plans was a goodwill gesture and not something they could promise forever. As with other pay TV providers, Philo has to pay broadcasters and cable network operators for the privilege of carrying channels, even if four of those companies — Paramount, AMC Networks, A+E Global Media and Warner Bros Discovery (WBD) — are investors in the service.
In his note on Monday, McCollum said the company has covered the cost of providing more than 70 live cable networks to its earliest and most-loyal customers, but that the economic realities of the pay TV industry meant it couldn’t subsidize that cost any longer.
“The truth is, we lose money on our oldest plans, and have for some time,” McCollumn conceded. “We’ve done what we can to absorb those costs out of loyalty to our subscribers, but in order to deliver on our values, we have to build a sustainable business.”
By October, Philo will transition its long-time subscribers to a new package that costs $25 per month, which will include the same selection of live channels they already receive, plus an expanded cloud DVR offering that saves recorded shows and movies for at least a year after they air on TV. For some legacy customers who were paying the lowest price for Philo, the adjustment will result in a 56 percent price increase.
Legacy customers can choose upgrade to take advantage of Philo’s current base TV package, which costs $28 per month and includes the same perks as the $25 per month plan, but with included access to the ad-supported tier of AMC Plus. (New customers, and those who are already on Philo’s $28 per month plan, can’t remove AMC Plus to take advantage of the lower rate offered to long-time subscribers. The $25 per month plan is a carry-over from the last time Philo adjusted the price of its base service.)
McCollum said customers can manage their accounts online, and cancel their service if they feel the price is too expensive. Those who do cancel can still watch more than 110 free, ad-supported streaming TV (FAST) channels available within the Philo app and record content from those channels in a complementary, 30-day cloud DVR. (Paying Philo subscribers also have access to the FAST channels.)
As a private company, Philo does not regularly disclose financial metrics of its business. In February, the company said it had 1.3 million paying subscribers, and marketing materials reviewed by The Desk showed the company reached 3.4 million streamers as of March.
The price increase on some long-time customers indicates Philo is likely facing increased pressure from some pay TV competitors that have launched similar streaming bundles of channels over the past few months, including packages that offer premium cable news and sports channels that Philo does not carry.
Earlier this year, DirecTV debuted several genre-themed channel packages for its streaming service, including a $35 per month plan that includes access to Disney-owned channels and streaming apps. On Tuesday, Echostar-owned Sling TV launched a package called “Sling Select” that includes Fox News, FX and NFL Network, priced between $20 and $30 per month, depending on where a subscriber lives.
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