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Startup KlowdTV’s Cheap OTT Bundles Won’t Interest Media Congloms

Michael Grams wants to change the way people can buy TV: His year-old KlowdTV is now offering four inexpensive broadband-delivered TV bundles, grouped by genre, starting at $3 per month apiece.

But he’s embarked on a quixotic quest — because the most popular TV channels are controlled by media conglomerates that have absolutely zero interest in KlowdTV’s business model.

In the absence of broadcast TV or big cable nets like ESPN, USA and TNT, KlowdTV has been forced to populate its over-the-top service with smaller, independent channels eager for new distribution opportunities. Many of them have little name recognition among the TV-watching masses. (Ever heard of TuffTV or FastnFunBox? Anyone?)

Grams admitted that KlowdTV’s biggest challenge is securing deals with the biggest networks. The large programming groups “are all historically used to being included in a base package,” he said. That’s at odds with the startup’s mission of letting subscribers pay only for the kinds of content they want: KlowdTV does not have a basic tier, instead charging only a $3.99 monthly “delivery fee” on top of the price for each bundle.

Even players trying to disrupt the pay-TV biz’s status quo have failed to bypass the basic-tier requirement. Dish Network’s Sling TV, for example, starts at $20 per month for more than 20 channels (including ESPN).

Grams didn’t mention the big media companies he was referring to. But the congloms that own the bulk of the networks on the TV dial are Disney/ESPN, NBCUniversal, Time Warner, 21st Century Fox, Viacom and Discovery.

There’s a very good reason major TV networks have resisted à la carte models, or anything even resembling them: The media companies would make far less money in carriage fees. Note that ESPN sued Verizon Communications over the telco’s recently launched FiOS Custom TV offering, which relegates the sports cabler to an optional sports add-on tier.

Grams understands why major TV network groups resist models that break apart the bundle, citing research estimating that à la carte pricing of ESPN would be around $30 per month. “I don’t know that anyone would pay that,” he said.

KlowdTV launched last September with two bundles: sports, which includes soccer net beIN Sports, GolTV, Fight Network, Fntsy Sports Network, FightBox, FastnFunBox and Outdoor Sport Channel; and “outdoor lifestyle,” with RideTV, HRTV, ChukkerTV, Pursuit Network, Hunt Channel, DocuBox, eScapes and Outdoor Cooking Channel.

On Thursday, the startup launched a global news package with Bloomberg HD, Sky News International, Newsmax, One America News, France 24 and RT America; and an entertainment package with channels including DuckTV, Rev’n, TuffTV, AWE, Vibrant and Youtoo America. Each bundle is $2.99 per month, with the exception of the sports package, which is $3.49.

“We think the right price point for media has been proven by Netflix and Hulu,” Grams said, of the range of $7-$12 per month. “We think that’s broadly appealing to our user base.”

The service is available via KlowdTV.com, iOS and Android mobile devices, Amazon Fire TV, Roku and Opera TV, with support for more platforms in the works.

KlowdTV, based in Alexandria, Va., is backed by a New York investment firm (which Grams declined to identify). It has a staff of about 20. Before co-founding KlowdTV in June 2014, Grams was CFO at Diversified Communications Inc. (DCI), which provides satellite services to TV networks.

Even without the most popular networks, Grams is convinced KlowdTV can make money by delivering under-distributed channels at affordable price points. “We don’t really believe that we necessarily have to have everything you have in a base cable subscription to be successful,” he said. “There are literally channels all over the world that are carried by one or two providers, or aren’t carried at all.” He cited ChukkerTV, a new linear network that’s all about polo (the horse kind, not the water kind).

“It’s very difficult for independent networks to get on major providers like Dish or Comcast. Those guys will ask for millions of dollars to get placed in the lineup,” he said. OTT providers like KlowdTV, he argued, are “giving rise to new live content that couldn’t get carriage before.”

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