When Philo launched its streaming TV service, everyone assumed that Millennial cord cutters would be the main customers. Flixed spoke with Philo CEO Andrew McCollum about the streaming service’s surprising appeal beyond Millennials.
Note: Our interview with Andrew was long enough that we decided to produce more than one article from it. You can read about how the appeal of traditional linear programming keeps people watching Philo. Or learn why cable companies are looking at Philo as a new partner.
Not As Millennial As Expected
Philo launched its service in 2017 with a remarkably low-priced subscription plan. For only $16, Philo’s customers got a mix of 35 popular lifestyle and entertainment channels like Food Network and AMC. Reaching such a low price required skipping the most expensive channels. Philo does not offer sports networks, 24-hour news networks and local TV stations. Of course, this meant that Philo couldn’t appeal to every customer.
“Philo started at college campuses,” McCollum said, “so we had some sense of how the product was being used there.” The team designed Philo expecting its customers to be Millennials who weren’t interested in the expensive channels cable companies and streaming services offered.
“We hypothesized when we created the service,” McCollum recalled, “that we would reach a different kind of demographic than was currently being well-served by existing TV offerings.”
Looking at Philo’s actual customers nearly two years after its launch, they don’t match Philo’s original expectations. “If you look at the age demographics of Philo,” McCollum said, “they don’t look all that different from the country at large”. Baby Boomers and Generation X have joined Philo at the same rate as younger cord cutters.
Puerto Rican Popularity
Another surprise came from Puerto Rico where Philo provides a low-cost supplement to local broadcasts. “We got comments from people that we weren’t properly identifying Puerto Rican phone numbers,” McCollum recalled. When signing up for the free trial, Philo does not ask for a credit card up front. Instead, it asks for a mobile phone number so it can text a reminder before the free trial expires. When Philo first launched, however, the system didn’t recognize Puerto Rican phone numbers. “That was our first hint that there really was an interest in using the service in some of these other places.”
Most streaming services don’t allow their customers to stream outside the 50 states. However, content licensing deals typically include Puerto Rico as well as American territories and possessions. McCollum explained that his team looked at serving all Americans and asked “do we want to restrict the usage from US territories? It didn’t make a lot of sense why we would do that. All the content on Philo is available everywhere.”
TV is the Best Way to Watch TV
In the early days of TV streaming, the industry expected viewing to shift from televisions to mobile devices. Philo launched with that same expectations. Watching Philo on a television required Roku-compatible hardware or casting from a mobile app.
“We knew that the number one way that Philo would be watched would be on televisions in the living rooms,” McCollum said. “I don’t know that we expected it to be quite as slanted as it is. About 90% of the viewing of Philo happens on televisions.”
Philo’s in-house developers have since expanded support for the living room experience by creating apps for the Android TV and Amazon Fire TV platforms as well as for the Apple TV.
People Watch Philo More Than Netflix
Philo’s customers spend more time watching its live TV streams than Netflix viewers spend on on-demand content. “The average Netflix subscriber watches like about an hour of Netflix a day,” McCollum claimed. “The average Philo subscriber watches around four hours of Philo a day.” [According to a recent Variety article, Netflix executives said their viewing average is two hours a day, but that doesn’t undermine McCollum’s point.]
With a cloud DVR and more than 30,000 hours of on-demand content, McCollum said that “we certainly set up the product to be as friendly as possible for time-shifted and on-demand viewing. Still, the majority of our viewing is live or near-live.”
McCollum attributes this preference to what he calls the “decision-making overhead” of on-demand video services. “When you open up the Netflix app on your TV, then you kind of kick off this long process of figuring out what you want to watch. Oftentimes, I’m watching with my wife and we’ll spend half an hour just trying to decide on what things we want to watch on Netflix and easily half the time we’ll just give up.”
He contrasted that on-demand experience to the more traditional, linear experience services like Philo offers. Viewers know they like the content their favorite channels produce. By switching Philo to a channel like Food Network, viewers will probably see the content they want to watch.
“I think that’s really something that’s lost in the conversation around this stuff,” McCollum said. The linear experience helps “take some of the burden of choosing exactly what you want to watch off your shoulders.”
“That has a lot of value and is a big driver of engagement with Philo”. He went on to say that the performance difference provides “a sense of how much that linear experience can drive a much deeper engagement with the content because it removes a lot of that decision-making overhead. We’re big believers in linear experiences.”
Flixed: We’ve been following Philo ever since your launch back in 2017 and we’ve speculated about who would be interested in subscribing to Philo’s service. Almost two years after Philo’s launch, are your long-term subscribers the people you thought they would be or are there any surprises?
McCollum: Well, Philo started at college campuses so we had some sense of how the product was being used there. And we had expectations about who would be interested in the kind of service we were creating when we launched publicly.
It definitely has been a little different than we expected. We really designed the product to meet the demands of a Millennial TV watcher. I think we expected originally that more of the audience might be on the younger side. We do see a strong contingent of young people who use the product. What was a little bit surprising, was how broad the age demographics of our user base turned out to be.
If you look at the age demographics of Philo, they don’t look all that different from the country at large. Maybe a slight over indexing on the younger side, but plenty of folks in their sixties, seventies and even eighties use Philo. So that was a little surprising to us.
We expected to have a stronger female demographic that subscribe to the service. We definitely see that, maybe a little bit more leaning that way than we expected.
The other thing is that we knew that the number one way that Philo would be watched would be on televisions in the living rooms. I don’t know that we expected it to be quite as slanted as it is. About 90% of the viewing of Philo happens on televisions. We thought that there would certainly be more usage on phones and other devices than there has been. Watching on a TV has the best viewing experience, so not so surprising, just we thought there would be higher usage on other platforms.
Attracting Cord Nevers
Flixed: Are your customers mainly former cable subscribers or are they coming from other streaming services?
McCollum: Yeah, that’s one of the really interesting things. We hypothesized when we created the service that we would reach a different kind of demographic than was currently being well-served by existing TV offerings.
Before Philo there really wasn’t a way to get a package of entertainment, lifestyle, knowledge focused channels we offer without paying a huge premium for live sports. It just wasn’t possible to do. If you cared about channels like HGTV and Food Network and Discovery Channel and Comedy Central and AMC, you couldn’t get those channels without paying $15 per month for ESPN and another $10 per month for all the news networks and just a lot of additional cost that those channels brought.
When we’ve polled our subscribers, over half of them had no TV service when they signed up for Philo. They were pure cord cutters. They weren’t necessarily switching from an existing cable provider, or even another virtual cable provider, to Philo – they had no service at all.
That’s really interesting to us. It means we’re really re-engaging people with television who had kind of dropped out because they thought the options weren’t meeting their needs. So it’s nice to see that.
Philo in Puerto Rico
Flixed: Unlike some streaming services, Philo supports Puerto Rico and US territories. Is that something that you’ve put any focus on and if so, what kind of response have you gotten?
McCollum: When we did the content licensing agreements, generally those agreements cover the US and territories. I think that some other virtual cable services, if there’s more of a dependance on local networks, it sort of adds this additional constraint. It makes sense not to launch because you have to work to bring the local stations online.
For us, all the content on Philo is available everywhere. We looked at it and we said do we want to restrict the usage from US territories? It didn’t make a lot of sense why we would do that. It was definitely something we felt like, if people wanted to use it, we would make it available to them.
We were surprised to see a good number of users from Puerto Rico signing up for the service. It’s not a massive audience for us, but it was noticeable. In fact, we have a free trial process where you can sign up for the service with just a phone number. We verify that that phone number is a mobile number because we use it to send you a text message as a replacement for a password. In the beginning, we got comments from people that we weren’t properly identifying Puerto Rican phone numbers. That was our first hint that there really was an interest in using the service in some of these other places.