A Philo executive this week praised cable and satellite companies for continuing to offer programming bundles to consumers, noting the approach is increasingly being franchised by streaming cable replacements and direct-to-consumer services as they seek a path toward profitability.
Speaking at the OTT Executive Summit on Tuesday, Philo’s Chief Operating Officer Michael Keyserling said the existential threats facing traditional and next-generation television can mostly be distilled down to how much consumers are asked to pay in order to receive the shows and live programming they want to watch.
“The problem was never really the concept of the bundle; the problem was always about the price, and how it was skyrocketing out of control,” Keyserling stated. “I think a lot of this is driven by the rising prices of sports and broadcast [channels], but you still had programming groups that were seeking increases in content while, at the same time, de-valuing their linear [channels] or preferencing their own SVOD [products].”
As costs continue to increase and programmers increasingly relegate their best content for their own streaming services, Keyserling noted that cable and satellite companies are starting to push back against demands for higher fees.
That pushback has led to an increase in programming-related blackouts — situations where broadcasters and cable network owners pull their channels from cable and satellite unless their demands for higher carriage-related fees are met — but also set the stage for traditional pay television service providers to negotiate newer types of deals that offer more flexibility in terms of carriage and unlock added value for subscribers, Keyserling said.
One such example offered was the recent dispute involving Charter Communications and the Walt Disney Company. For nearly two weeks, customers of Charter’s Spectrum TV were unable to watch Disney-owned ABC stations as well as ESPN, the Disney Channel, FX and National Geographic. The blackout ended with Charter and Disney agreeing to a unique arrangement through which Charter would remove some lesser-viewed channels like FXM and Freeform from its platform, while also offering some Spectrum TV customers access to Disney Plus and ESPN Plus as part of their plans.
“That’s a model for the future,” Keyserling said. “I think we’re going to continue to see that very similar type of model play out. It’s really unfortunate that blackouts and carrier disputes are what are required to innovate…it feels like people only get forced into these things kicking and screaming, but, at the end of the day, I think it ultimately ends up in a better place for all parties.”
Keyserling thinks about the value proposition of traditional television bundles a lot. His service, Philo, offers streaming variants of more than 70 traditional cable channels from programmers like AMC Networks, A+E Networks, Paramount Global and Warner Bros Discovery (WBD) for $25 per month. (All four named media companies are also investor-owners of Philo.)
Over the past two years, Philo has also increased its use of free, ad-supported streaming television (FAST) channels as a way to offer more content options to its subscribers — a strategy that streaming competitors like Fubo, Sling TV and Vidgo have also adopted.
Philo has added new FAST channels at a pretty good pace: Shortly after Keyserling’s keynote, the company published a blog post that announced the addition of Mythical 24/7 and seven new streaming channels from Lionsgate, including MovieSphere, OuterSphere and Ebony TV.
While Philo’s FAST channel line-up still requires a subscription to access, Keyserling said the inclusion of streaming channels that live within the same guide as cable networks is part of a broader strategy to deliver a premium experience to customers.
“We survey our subscribers a lot — we know they use free services,” Keyserling stated. “We also know that nobody really wants to switch apps if they can avoid it.”
The onboarding of FAST channels also helps reduce churn when subscribers are thinking about moving away from a service, Keyserling claimed.
“Churn is a big part of this business, and having a place for [subscribers] to stay within their ecosystem and making it easy for them to re-subscribe when they’re ready is really where you want to be,” he said.