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Andrew McCollum also wonders if TVision's aggressive pricing and packaging model can be sustained as it eventually expands beyond an initial focus on T-Mobile's postpaid mobile base.
T-Mobile is out to disrupt the US pay-TV market with its revamped TVision streaming service. But an OTT-TV competitor that shares some similarities in both pricing and packaging with TVision's entertainment-focused, $10/month "Vibe" service doesn't share T-Mobile's optimism.
"It feels a little more of the same in terms of a company coming in and bringing in a service to market at an aggressively low price point that just doesn't feel sustainable in the long term," Andrew McCollum, CEO of Philo, said in response to this week's introduction of the new TVision.
He's not alone. Colin Dixon, founder and chief analyst at nScreenMedia, argued in this blog post that "there are better options for any T-Mobile customer looking to stream live TV," believing TVision will struggle "to turn many heads" and rekindle growth in the virtual multichannel video programming distributor (vMVPD) market. He also gives a shout-out to Philo's "much more balanced and extensive set of general entertainment channels" that also includes an unlimited DVR, when compared to TVision Vibe.
Figure 1: Andrew McCollum McCollum says TVision's new $10/month 'Vibe' offering won't cause Philo to make any quick or major adjustments to its pricing and packaging strategies.
The $10 TVision Vibe package features 34 channels, a VoD library, access to two concurrent streams, and an option to add 100-hours of cloud DVR storage for an additional $5 per month. That compares with Philo's entertainment-focused OTT-TV service, which starts at $20 per month for a lineup of 60-plus channels, three streams, a VoD library and a cloud DVR with unlimited storage (recordings are kept for 30 days).
"We've never been in the market to have the lowest price. We want to be a service you love that feels like a great value," McCollum said. "There's a lot of caveats to the price comparison that you have to enumerate to get the complete picture."
But pricing and packaging (not to mention subscriber counts) are often used to size up service providers in a US pay-TV market that's in decline despite the presence of various OTT-TV options.
T-Mobile is launching the new TVision service, which also includes more expensive "Live"-branded services outfitted with sports, news and some broadcast TV programming, on November 1. T-Mobile is initially offering TVision exclusively to the company's postpaid mobile base. The carrier then plans to extend TVision to legacy Sprint customers later in November and to prepaid mobile customers and to non-T-Mobile subs sometime in 2021.
T-Mobile: Pay-TV not a profit center, or a loss leader
T-Mobile said it will announce TVision pricing for non-T-Mobile customers when those services are launched. "For now, TVision streaming services are available exclusively to T-Mobile customers and are a great reason to switch wireless providers!," a T-Mobile official said via email. "TVision services are built to give customers choice with right-sized packages at ultra-competitive prices, and we don't see that changing as we expand availability."
T-Mobile execs have already stressed that TVision's no-contract service will avoid bait-and-switch, "exploding offers" that would cause pricing to rise over time.
It's not yet clear how much profit TVision will generate out of the chute or how programming costs will be absorbed by T-Mobile's initial, exclusive focus on its postpaid mobile customer base. But T-Mobile believes the broader strategy in play with TVision will pay off.
"We are a wireless pure play – mobile and broadband wireless. TVision is not about trying to create a new profit center – it's about strengthening our core wireless business, deepening our relationships with customers (revenue per account) and improving retention," the T-Mobile official added. "And it's great way to serve and delight customers who are fed up with legacy TV solutions. We think TVision will help increase purchase consideration for our home broadband when customers see they can get a complete home Internet and TV solution from us. While TV is not a new profit center, it's also not a loss leader … and it's not our profit margin at stake here."
Mixed emotions
McCollum acknowledges that he has mixed feelings about the new TVision. While he's "sort of impressed" with how T-Mobile has been able to enter the fray with a multi-package approach that includes the $10 Vibe service for postpaid mobile customers, McCollum is likewise "mystified" about how T-Mobile was able to pull it off, given how programing deals are typically crafted.
"Credit to them, I suppose, for doing it," McCollum said. "I don't think I'm speaking out of school to say that every major programmer that you go and do a deal with will seek to require that at least their core networks are carried in the base package to all subscribers."
But he also realizes that there are exceptions. For example, AT&T's Watch TV service delivers a package of 35-plus entertainment-focused channels and a VoD library to qualified AT&T mobile customers on certain unlimited plans. But notably, AT&T halted the sale of Watch TV as a $15 per month standalone service in June.
Meanwhile Sling TV sells two primary packages – Orange and Blue. While there's some programming overlap between them (likely due to limits on how some channels can be packaged), Orange is more focused on Disney programming while Blue includes more channels from Fox and NBC.
So, getting creative with pay-TV packages, despite the business constraints, is not an impossible task. But the big unknown centers on the details of T-Mobile's carriage deals with programmers and what wriggle room it has in creating pay-TV packages that start as low as $10 per month, at least for T-Mobile's postpaid base.
Layer3 TV, the Denver-based startup that T-Mobile acquired in 2018 to enter the pay-TV business, focused on big, more traditional pay-TV packages, with access limited to a handful of US markets. Layer3 TV entered as a new player with no customers to its name, so it lacked the kind of subscriber scale needed to negotiate the best programming contracts possible.
T-Mobile, on the other hand, is a big company with a massive mobile subscriber base that just got bigger after merging with Sprint, perhaps putting it in better position to drive better carriage deals for its new, nationwide OTT-TV offering. In fact, T-Mobile argued in 2018 that the proposed Sprint deal would be critical in providing the additional scale necessary to disrupt the US pay-TV market, estimating then that Layer3 TV's content acquisition costs were 20% to 30% higher than those of top cable operators and other large MVPDs.
Staying the course
McCollum said the presence of TVision Vibe won't force Philo, which recently crossed the 750,000 subscriber mark, to make any sudden strategy changes or embark on aggressive promotions.
"We don't think we're anywhere near a saturation point with folks who are interested in the type of package we offer today," he said. "As a company, we don't really plan what we do based on competitors in the market. That's not really our style. We try to deliver the best service we can and we hope that stands up compared to what others are doing."
Philo, at least for now, will also retain its neutral, bring-your-own-device footing, as it has no immediate plans to develop and sell its own line of streaming devices optimized for the service in the way that TVision has with its new Android TV-powered "Hub" dongle. AT&T has taken a similar approach with an Android TV box for its new AT&T TV service.
"We feel good about our partnerships with hardware device makers," he said. "There's not one preferred home for Philo."
He's also not blind to the fact that tensions between OTT services and device makers are on the rise. Roku and NBCUniversal, for instance, engaged in a public spat about Peacock before a deal was ironed out. Meanwhile, WarnerMedia has yet to notch deals to get its new HBO Max streaming service distributed on the Roku and Amazon's Fire TV platforms.
"I do feel this concept of direct-to-consumer is a bit of a myth," McCollum said. "There still is someone between the service provider and the consumer, and that's the device maker. More and more, you've seen device makers flex their muscle in those relationships."
There's also no immediate plan for Philo to expand programing beyond its core focus on general entertainment, but it's leaving the door open if the economics make sense.
"We don't have any built-in bias against sports or news or broadcast content," McCollum said. "It's simply a challenge of being able to offer it with packaging and economics that we think are compelling that we can stand behind."
If there's a way to expand into more programming areas that provides value to customers at a fair price point that's also sustainable, "we would be thrilled to do it," he added.
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— Jeff Baumgartner, Senior Editor, Light Reading
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