Entertainment Channels Launch $16-a-Month TV Bundle With No Sports

By Cara Lombardo Features Dow Jones Newswires

There's a new way to get about three dozen entertainment-oriented cable channels for $16 a month, so long as you can live without watching the big game.

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The online-TV service Philo launched Tuesday, offering a bundle of 37 channels, including Comedy Central, TLC, Food Network, AMC and A&E. It's the newest player in a sea of streaming offerings promising consumers everything from "skinny bundles" of channels to access to individual networks.

The people behind Philo and the networks supplying its programming say it is a long overdue package aimed at cable TV "cord-cutters" who don't watch sports and cable news channels. Skeptics see it as a roundup of less popular networks with a limited market on their own.

The Wall Street Journal reported in September that the first-of-its-kind package was in the works. Now, the full channel lineup and details about how it works are here.

Basic Philo subscribers get access to a slate of channels owned by Discovery Communications Inc., Viacom Inc., Scripps Networks Interactive, A+E Networks and AMC Networks. Among the other networks included are Nickelodeon, Animal Planet, History, HGTV and MTV. (For an extra $4, users can tack on nine more channels.)

The five companies supplying programming are also Philo's primary financial backers, together investing a total of $25 million.

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For some of the media companies involved, there's a defensive aspect to Philo. Some of their networks aren't part of the streaming TV bundles offered by the likes of YouTube and Hulu. Offering their own entertainment-focused bundle is a way to guarantee they can reach cord-cutters.

The hope among some of Philo's media backers is that an entertainment-focused package can eventually be carried by pay-TV providers as an alternative to the standard, basic package.

Philo users can watch shows live or on-demand. A third option, saving shows, lets them skip ads.

For an entertainment-focused package, there are some noticeable holes. NBCUniversal properties such as Bravo and E! are missing, as are Time Warner Inc.'s TNT and TBS. Philo also doesn't include broadcast networks, so subscribers who want that programming would have to use an antenna or pay for another streaming service like Hulu.

Consumers can choose from many other streaming services, including Sling TV and DirecTV now, but they cost more and their base packages come with sports channels including ESPN and cable news networks such as CNN.

Philo plans to add social features early next year to let users see what their friends are watching, similar to music service Spotify, and sync viewing so people can watch shows together from different locations.

Chief Executive Andrew McCollum, who was a founding member of Facebook, said Netflix Inc. and other established services are failing to capture the social aspect of watching TV, such as watching a season finale as millions of others do or telling a friend about a new show.

"Your social network and your friends are the best recommendation out there," he said.

Disney Chief Executive Bob Iger dismissed the idea of a product like Philo on an earnings call earlier this year when asked about the feasibility of lower-cost packages that exclude sports.

"I don't see how that's practical in terms of gaining much penetration," said Mr. Iger, whose company owns ESPN.

Viacom's head of distribution, Tom Gorke, whose company has pushed distributors to sell its channels in a lower-cost offering, disagrees. "Philo isn't designed for the full-package consumer," he said. "But I believe there's also a sizable population that really would want something like this."

Philo first launched in 2011 as a streaming service for college campuses. Mr. McCollum, who got involved as an investor and board member before becoming CEO in 2014, said the firm relied on five years' worth of data about what college students watch to shape the channel list for the new service.

Surveys show consumers are polarized when it comes to sports. In a report from analysts with Jefferies investment bank last month, 26% of people who had downgraded to a cheaper TV or cable package in the past year said they'd be extremely interested in a lower-cost entertainment package that didn't include sports, while 27% percent said they wouldn't be interested at all.

A 2016 survey conducted by Parks Associates found that 43% of pay-TV subscribers said it wouldn't be difficult to give up sports channels, while 45% said it would be very difficult or difficult. The same report noted that sports coverage tends to be most appealing to single men and homes with children and least appealing to single women.

Brett Sappington, senior director of research at Parks Associates, said Philo will accelerate the unraveling of the traditional cable bundle and if, successful, could prompt pay-TV providers to offer similar bundles.

"It's a real mix-and-match environment that we're getting into," Mr. Sappington said. "It's not quite a la carte but we're getting there."

Write to Cara Lombardo at cara.lombardo@wsj.com

(END) Dow Jones Newswires

November 14, 2017 06:04 ET (11:04 GMT)