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14 January 2021

Philo, Pluto TV ponder future of video – a stepping stone to rebundling?

Something we would love to see is a pro-unbundling OTT video executive going toe-to-toe in a panel session with a large operator positioning itself as a so-called content super aggregator. Representatives from both camps have featured prominently yet separately in 2020’s various virtual showcases, often overlapping to confusing effect as the lines blur between unbundling, rebundling, and aggregation.

‘The Great Unbundling in Video’ conference session at this week’s virtual CES didn’t beat around the bush – with Philo CEO Andrew McCollum (a Facebook co-founder) and Pluto TV’s SVP of Programming Scott Reich each voicing their predictions for accelerated cord cutting correlating with the demise of the cumbersome cable TV package. What we find interesting is how the likes of Philo and Pluto TV are happy to criticize cable TV operators and encourage pay TV subscribers to cut the cord, while also actively pursuing integration deals with operators reinventing their TV strategies around third-party service aggregation.

Is the great unbundling in video not just a stepping stone for the rebundling of content into a modernized version of the lumbering channel bundles of old? Pay TV operators are certainly pushing that idea and OTT apps are more than happy to jump on board, for now.

While these are not new trends by any stretch of the imagination, Philo and Pluto TV have been closely monitoring pandemic viewing habits that will underscore trends for years to come.

 

Ad-supported Pluto TV is the larger of the two, thanks to its takeover by ViacomCBS last year, Philo is a fast-growing subscription-based platform that prides itself on a low monthly price point of $6 that has been set in stone since its 2017 launch. For perspective, McCollum noted that YouTube TV has hiked prices from $35 to $65 a month over this time.

He highlighted two big impacts on Philo’s business over the past year. The most obvious was the huge surge in new subscribers trying out Philo for the first time, which in turn triggered a reduction in churn, but the more surprising trend was the return of churners. “A lot of people who previously tried Philo, but stopped, have come back,” said McCollum.

On the flip side to increased viewing were the lumps that were knocked out of Philo’s advertising revenues during the pandemic, admitted McCollum, although this has “largely recovered” since.

“I should say that the majority of sign-ups were not people switching from traditional TV. Once you get over the hump and try a service like Philo, you will find it is unequivocally better. In years from now, people aren’t going to consider this cutting the cord, they’ll just consider it TV because it’s just a better way to get TV,” McCollum continued.

Another trend arguably unique to Philo, which focuses heavily on linear and on-demand entertainment, is that daily viewing time hardly changed during 2020’s lockdown periods, while other OTT video services saw viewing time skyrocket. McCollum explained this is because Philo’s average viewing time is already on the high end – at between 3.5 to 4 hours daily per subscriber – so there are not realistically enough hours in the day to experience a significant spike.

Despite Philo successfully riding the 2020 streaming wave, McCollum is approaching 2021 with caution and uncertainty, where economic impacts of the pandemic will play out – potentially leading to a longer recession period that could affect Philo and services like it in the years to come.

Being a consumer-centric event, CES sessions generally avoid touching on underlying technologies, although McCollum praised his 90-person company for building almost all its technology in-house with its own engineering team. “This allows us to be really scrappy and operate with low overheads and generally focus on how we can deliver value and not be forced to continually raise prices,” he noted.

Pluto TV’s Reich echoed many of these patterns of increased usage, reduced churn, and ad revenue slumps. The difference is that Pluto TV has zero barrier to entry, being a totally free service, which has resulted in an influx of new viewers. Beyond Covid-19, Reich called out the US Presidential Election as a huge moment for Pluto TV with its line-up of news channels. Data produced from these two seismic events shows a combination of viewers coming into Pluto TV for news and then switching to entertainment channels for a whole lot of escapism once viewers have had their fill of viruses and politics.

Pluto TV has struck a perfect balance of content here to keep viewers within its ecosystem. Crucial to this success is not leaning too heavily into on-demand content, but leaning into linear experiences. Reich applauded how all Pluto TV’s channels are programmed by experts, not algorithms, with curators knowing channels inside-out.

“I got here in February. I looked at a lot of data and optimized the organization of the platform to get people into new categories. We looked at the roadmap and after the acquisition saw a lot of new content added,” said Reich. Most of this content came from the CBS side, with titles that evoke nostalgia in older demographics while delivering something completely new for younger viewers.

Reich did not dismiss the notion of major structural changes at the hands of Pluto TV’s new parent company. “You will see us evolve over time as the industry evolves and figures out best practices. Pluto TV’s priority is on the free side of things, while Paramount+ and Showtime are priorities on the paid side. We’re constantly playing around with the best way to have something entertaining for free and upsell viewers into premium content behind a paywall,” he added.

In other words, ViacomCBS acquired Pluto TV to serve as a portal into premium content, as well as being a successful ad-based OTT service in its own right – closing in on 40 million MAUs across 24 countries.

“Taking advantage of who our corporate parents are will set us apart – so we’re being more aggressive there,” he added.

On a final, thought-provoking note, McCollum pondered the future of bundling and aggregation. “I do wonder what the limit is. With so many different services, log in details, billing, tracking of favorite shows, people feel overwhelmed. People complain to us that they wish they didn’t have to switch apps and could get everything through Philo. Over time, we believe things will become more consolidated in a lot of ways. But, ultimately, choice is good for consumers.”

Events with the scope of CES have played it very safe in their all-digital clothes, seeing the virtual format as a temporary blip in the road before returning to the dazzling lights of Las Vegas. What CES does not seemed to have grasped, however, is that the future survival of these events will depend on a hybrid model of physical and virtual stimulation. Oh and there wasn’t a Q&A session as far as the virtual eye could see this week.