Philo and AT&T WatchTV have set the bar for low-priced live TV streaming services. Yet, despite their similarities, the two skinny-bundle services are driven by very different strategies. Philo has some breathing room for a year or two, but it will not be able to compete with AT&T WatchTV in the long-term.
Philo Shifted the Market
When Philo hit the market in November 2017, the company positioned itself as the first streaming service to focus exclusively on “on entertainment, lifestyle and knowledge programming.” More importantly, its main subscription option was priced at a record-low $16 per month.
The previous low-cost leader, Sling, offered $25 plans and then used a complicated mix of add-ons and feature upgrades to get people to pay more. Philo was simple and straightforward.
The $16 subscription included all of the service’s features. At its launch, Philo’s base plan offered 35 channels, an unlimited 30-day cloud DVR, and three-device simultaneous streaming. However, app support was limited to iOS, Roku and computer desktop browsers. In subsequent months, Philo released more apps and now covers most of the major streaming platforms.
Slim lineup for a slim price
While its features compared favorably to other streaming platforms, Philo’s channel listing strategy was very different. You couldn’t get any of the live sports networks. You couldn’t get NBC or the other broadcast networks. And you couldn’t get channels, like SyFy and USA, that the networks own.
Instead, Philo offered a mix of lifestyle and entertainment channels owned by media companies Viacom and Scripps. The listing included popular channels like A&E, HGTV and Nickelodeon. These channels also cost a lot less than the ones available through traditional streaming services.
At the time of Philo’s launch, Adweek spoke with Viacom chief executive officer Robert Bakish about why he chose to support the new streaming service. Companies trying to offer cable-like services for $40 per month, Bakish said, “are not economic on a sustainable basis today” due to the ever-rising prices for broadcast networks and sports networks.
Even Philo is not immune to rising distribution fees. Earlier this year, Philo effectively raised its prices by dropping the $16-per-month plan and only offering a $20-per-month plan. The change came at the same time Philo added several more channels to its lineup. In an interview with Business Insider, Philo CEO Andrew McCollum explained, “Our costs do go up. That’s a challenge. We had to figure it out.”
Despite the low prices, Philo’s limited selection of channels wouldn’t appeal to cord-cutters who want an all-in-one replacement for their cable subscriptions. But for non-sports fans or people looking to supplement their over-the-air TV reception, Philo was an intriguing option. Philo does not release its numbers, but an estimate published by Cord Cutters News in mid-2018 put Philo at about 150,000 subscribers.
Introducing AT&T WatchTV
Mid-2018 was when AT&T launched its own skinny-skinny bundle, AT&T WatchTV. David Christopher, the head of AT&T Mobility and Entertainment division, declared that AT&T WatchTV would have “an incredible lineup of content that delivers more of what you care about – over 30 live TV channels and more than 15,000 TV shows and movies on demand.”
On paper, AT&T WatchTV looks a lot like Philo. WatchTV has 41 channels to Philo’s current count of 58. The lineups of both exclude sports and broadcast networks in favor of lifestyle and entertainment channels. However, AT&T can offer CNN, TNT and other channels thanks to its acquisition of Time Warner. More importantly, AT&T WatchTV’s price is only $15 per month compared to Philo’s new, more expensive $20-per-month offering.
However, the comparison shifts in Philo’s favor from a features standpoint. Philo is available on a wider range of devices, most notably the Roku. You can only use AT&T WatchTV with a single device compared to Philo’s three-device limit. And AT&T WatchTV doesn’t offer a cloud DVR to record your favorite programs.
AT&T’s Convoluted Video Strategy
AT&T’s move left many people who follow the streaming business scratching their heads. The confusion became more widespread when AT&T stopped offering sign-on promotions for its cable-replacement service DirecTV Now and then raised DirecTV Now’s prices.
To understand what AT&T is doing, and how AT&T WatchTV will compete with Philo, you need to understand AT&T’s overall strategy when it comes to video distribution.
The company has two legacy TV distribution businesses. U-verse is a direct competitor to cable that AT&T offers its broadband customers. DirecTV is a satellite TV provider that AT&T bought in 2015. Both companies are in steep decline, losing a combined 500,000 subscribers per quarter. In mid-2019, AT&T will launch a set-top-box replacement to DirecTV and U-verse that will pull video over the internet.
DirecTV Now is AT&T’s over-the-top (OTT) streaming television service. A few years ago, it was in a strong second-place behind the industry’s then-leader Sling. Unfortunately, DirecTV Now’s strength in subscriptions came at a quite-literal cost — expensive promotional offers like free Apple TVs.
At the end of this year, AT&T will launch an on-demand streaming service based on the content it acquired with the Time Warner merger. Anchored by HBO, The Hollywood Reporter detailed, this new service will offer movies from the Warner Bros. archive and its own original content.
So AT&T’s strategy consists of this new service, a broadband-based traditional TV provider, an over-the-top cable-replacement streaming service and the new WatchTV skinny bundle.
Check Back in Two Years
AT&T Watch’s role in all of this can be seen in the telecoms company’s latest quarterly report. Rather than discussing subscriber levels, AT&T describes the 500,000 “established accounts” that have access to the streaming service. These are AT&T’s mobile customers who get AT&T WatchTV free with their wireless subscription.
AT&T WatchTV is not about competing with Philo or Sling. It’s about supporting AT&T’s mobility business. Over the next few years, AT&T will invest billions of dollars to deploy next-generation 5G wireless technology. AT&T and its competitors see streaming video as a key driver for 5G adoption.
Over the next couple of years, Philo may lose some customers who have AT&T Unlimited plans and get WatchTV for free. Still, Philo probably doesn’t have too much to worry about in the near term. WatchTV’s lower prices don’t really justify the slimmer channel lineup and weaker features.
Over the five-year timeframe, however, Philo will come under increasing pressure as video-over-5G becomes more common. AT&T and its competitors will offer their low-cost streaming bundles as freebies to support their larger, more profitable mobile businesses.
And that won’t leave room for a stand-alone service like Philo. Its best hope may be an acquisition by T-Mobile. Philo does follow an “un-cable” strategy that isn’t too different from T-Mobile’s “un-carrier” strategy.