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A Facebook co-founder launches a $16-a-month TV service

Andrew McCollum's Philo is the latest entrant in a growing field of bundles taking on traditional pay-TV services.

A co-founder of Facebook launched a $16-a-month package of TV channels on Tuesday, the latest entrant in a growing field of bundles taking on traditional pay-TV services.

The service is called Philo — after Philo Farnsworth, the founder of the all-electronic television — and, at $16 a month, it is far cheaper than rival bundles, which normally sell for $35 to $40 a month.

Philo advertises itself as unique in that it carries 35 channels from the likes of A&E Networks, AMC, Discovery, Scripps and Viacom, which are not broadly available in other online packages. The companies will also become equity investors in the service. Other partners include the youth-focused business news channel Cheddar.

Philo doesn’t carry sports or channels owned by the broadcast networks to keep the price low. In addition to live TV, Philo is offering on-demand channels, a recording capability and what it's calling a sleek easy-to-navigate interface that is initially free of advertising.

Andrew McCollum joined Philo as the company's CEO in 2014. Courtesy Philo

The CEO of Philo, Andrew McCollum, 34, was one of the first employees at Facebook to work closely with Mark Zuckerberg.

McCollum, who left Facebook to finish his degree at Harvard, said he joined Philo because "I wanted to do something where I could own the vision.”

Philo will compete with online TV bundles like Dish’s Sling, AT&T’s DirecTV Now, Hulu, YouTube and Sony Playstation Vue. Collectively they have around 3 million subscribers, according to Brian Wieser, an industry analyst with Pivotal Research, who also estimates that around 1.8 million homes subscribe only to the virtual cable offerings, not pay TV.

Wieser estimates that around 72 million households subscribe to subscription video-on-demand services such as Amazon, Hulu and Netflix, which alone has 65 million subscribers in the U.S.

Brett Sappington, senior director of research at Parks Associates, said in an interview that the number of over-the-top video services available to consumers had "exploded over the past three years in the U.S. market and worldwide."

He said his firm today tracks 205 active over-the-top video services in the U.S., including Philo.

In a Twitter post Tuesday, Sappington said Philo would attract "non-sports folks & cord cutters that get their sports and local broadcasts over-the-air."

With those numbers in mind, Wieser said he thinks the market at the moment is limited for another TV bundle package.

“I think that a service like Philo can have appeal, but to the extent that there are still at present relatively few cord cutters, the number of subscribers will probably be relatively small," Wieser said.

Another analyst, Michael Nathanson, a founding partner at MoffettNathanson, said he thinks the price point will aid Philo.

Nathanson, who covers the media and advertising industries, said in an email that the growth of over-the-top video services has been impressive and will pick up in the fourth fiscal quarter "as national marketing pushes by Hulu and YouTube take off."

"Philo has a very interesting model that our research showed has a real chance of being adopted due to low price points," he said.

McCollum said Philo would soon add a social feature to allow subscribers to discuss shows with their friends. The service will use a "what's trending" algorithm to serve up content it thinks users want to see first.

“What we learned at Facebook is that Netflix spent an enormous amount of resources and energy and money building the greatest recommendation engine they can,” McCollum said, adding that Philo's approach would be an improvement over Netflix.

“Your friends and your social network are the best recommendation algorithm that exist," he said.

Philo is backed by a host of investors, including New Enterprise Associates; Rho Ventures; HBO; Mark Cuban’s Radical Investments; and WME.