For Frndly TV, the path to profitability in the virtual multichannel video programming distributor (vMVPD) business is a combination of experience, discipline and a little bit of faith.
Launched in October 2019 by a group of former Dish Network executives led by CEO Bassil El-Khatib, Frndly TV has managed to quickly grow its subscriber base to more than 440,000, adding 200,000 customers in the fourth quarter alone. It started turning a profit in December, executives said.
Starting at $5.99 a month, Frndly TV offers a bundle of family-friendly and inspirations networks including Hallmark Channel, Up TV, INSP, Outdoor Channel, The Weather Channel and BabyFirst. The service also has $7.99 and $9.99 tiers, which add cloud-based DVR recording functionality and authorize more screens.
Frndly’s latest programming addition is the Dove Channel, via a deal with Cinedigm Networks.
“There could not be a more perfect fit than Dove Channel on Frndly TV,” Cinedigm president Erick Opeka said. “Both were created with the mission of providing positive, family-oriented entertainment. Cinedigm is focused on delivering enthusiast audiences with content they’re passionate about and our partnership with Frndly TV underscores that notion of family-safe programming.”
The channel also fits with Frndly TV’s disciplined financial model and subscribers will get the Dove Channel without paying more.
Bigger vMVPDs YouTube TV, Hulu Plus Live TV, fuboTV and Dish’s Sling TV have been money losers, with expensive programing costs overwhelming the consumer benefit of being a low-priced alternative to pay TV.
Frndly saw an opportunity in a different approach. “All the big players are trying to be everything to everyone,” said El-Khatib, who co-founded the vMVPD with chief programming officer Michael McKenna, chief financial officer Mike McClain and chief operating officer Andy Karofsky.
“We identified that there is a very large underserved market that no one’s going after,” El-Khatib said. “It’s that middle America market, people who are looking for that uplifting family-friendly entertainment.” The way he sees it, “middle America” viewers can be found not just in the South and Midwest, but just outside most metropolitan areas, even in California and New York.
“There are a lot of independent channels that are not widely distributed but have loyal followings,” El-Khatib added. “If we could provide that in a cost-effective manner, we thought people would appreciate that and it proved to be true.”
Frndly TV does not offer as many channels as some other services, but its pitch is being a good value on a per-channel basis. It is operating lean and mean to stay that way, McClain said.
“Our plan is we know what our price point is,” McClain said. “Our packages are designed so that we have a healthy gross margin.”
Frndly hasn’t raised its base price since it started.
With their industry backgrounds, including some who were involved in the launch of Sling TV (which Dish founder Charlie Ergen recently admitted the company “stumbled” with), the Frndly TV team wasn’t trying to revolutionize the business, having learned what works and what doesn’t.
Steve Smith, executive VP, distribution and affiliate marketing for the Outdoor Sportsman Group, said he was introduced to Frndly TV by McKenna.
“We get a lot of people calling us to try to do deals and we don’t do them all. We try to make sure they have a business that’s going to work,” Smith said. “I’ve known Michael a long time, he’s a smart guy, and so’s Andy. We said, hey, let’s take a shot, and it’s been great. They’ve done really well.”
Smith said he wasn’t aware of other distributors targeting less-populated so-called B and C counties and that FrndlyTV had been doing “really, really smart” digital and social marketing.
“I don’t know where the ceiling is,” he said. “They haven’t found it yet.”
Frndly TV was originally backed by investment from friends and family members, and more recently raised money via a Series A round of financing and the sale of convertible notes.
Right now, Frndly TV’s founders also handle customer service, which gives them a direct line to its audience.
The company recently started to sell advertising, inserting ads on some channels and selling some programmatically. “Other services have negative gross margins on their product and they hope to make it up with ad sales,” El-Khatib said. “Ad sales is gravy for us.”
