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So you want to launch a vMVPD? How Philo got its start

We couldn't go into companies like a Viacom, Disney or any others and say, ‘License all your channels for our consumer streaming TV service.’ You would have gotten laughed out of the room.”

One of Facebook’s co-founders — Andrew McCollum, now CEO of vMVPD provider Philo — recently spoke with The Current to share the company’s unusual backstory and how it grew its subscriber base to more than 800,000 users, a whopping 300 percent upswing when compared to last year.

The company’s journey starts at Harvard University around 2009. McCollum — fresh off living with Mark Zuckerberg out west where he helped stand up social networking platform Facebook — returned back to Boston where he met fellow Harvard grads Nick Krasney and Tuan Ho. The duo, according to McCollum, had figured out a way to stream linear TV content online. “Then all their friends started to see them streaming TV and were like, ‘Hey, that's really cool. Can we get an account?’” says McCollum. “Enough people said that where we thought we should actually build a real version that other people can use. And that was sort of the beginning of Philo.”

But standing up a vMVPD service isn’t easy when you’re just a college student, yet that’s essentially the road Philo took when negotiating with industry heavyweights such as Disney and Viacom. The company today does not offer sports, though its lineup includes popular channels such as HGTV, Food Network, A&E and AMC, among others for about $20 a month.

McCollum shared how Philo was able to achieve success, as well as where he believes the television industry is going. Our interview has been edited for brevity and clarity.

Why is your company called ‘Philo?’
Philo is named after Philo Farnsworth, who was the original inventor of the electronic television. He’s a fascinating character who was a Mormon farm boy with very little formal education growing up. He taught himself about electronics by reading popular electronic magazines. At 14, he had this realization — while plowing the fields — that you could capture and transmit an image, line-by-line, electronically. We take a lot of inspiration out of the spirit of that story.

How did Philo get its start?
When Philo started in 2011, you couldn't go to companies like Viacom, Disney and others and say, “license all your channels for our consumer streaming TV service.” You would have gotten laughed out of the room. So building it for college students was a way to build our product, experience, and the technology before the rights were available more broadly.

Did you guys ever think about giving up?
Yes. Every startup has those stories and moments — it’s a rollercoaster ride even for the most successful ones. I was a co-founder of Facebook, and even Facebook, which was by all outward appearances was regarded as a rocket ship of success from the very beginning, there were always big, tough moments and crises. Philo definitely had its share of those times. It took about six years from when we first launched the college product until we finally launched a publicly available version.

Can you give me an example of some of the hurdles you faced?
Just getting the programming deals done was like a two year effort because it’s just so difficult to convince some of these incumbent TV companies to try new things. There’s a lot of inertia and a lot of things that slow down progress.

How did you convince the TV companies to license their content?
We approached them in a different way than other companies. Starting with college was an interesting and compelling part of our story — only about a third of college students even bring a television to school anymore. So this was the leading edge of the audience that was turning away from traditional television. We weren’t just building a product to reach and engage with this audience, but we were building our product in college so we had a unique perspective on it. We partnered with them and they became investors in the company.

What was your advantage in these negotiations?
Oftentimes, companies approach negotiations with content owners, and it's a sort of knock-down, drag-out kind of street fight. Whereas we had this incredible advantage of having this huge data set of what people were watching in the college version of Philo. We had over 70 schools with different channel lineups, different subscriber bases, different demographics. I mean, all of them were college students from all over the country.

What challenges does CTV face in capturing more ad dollars from linear?
There's this massive change of how television advertising is sold from a one-size-fits-all sort of audience-based model to advertising that is dynamic, targeted, programmatically served, sold on auction basis and is much more measurable and interactive. That's a real huge change.

How long will it take?
It’s happening slowly. Advertisers are still learning about the opportunities that are offered through dynamic advertising, and how to take advantage of that. And they’re still learning how to do targeting and make it effective. Things are changing and adapting, but it's happening slowly.