Inside Plex’s Quest to Become a One-Stop Shop for Digital Media

The Media Center Maker Is Gearing Up to Add Ad-Supported Videos, Starting With Movies From Warner Bros.

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Courtesy of Plex

Get ready for yet another ad-supported video service: Media center app maker Plex is gearing up to add free movies and TV shows to its app, starting with content from Warner Bros. Plex announced a deal with Warner Bros. Domestic Television Distribution Thursday, which will allow it to add a still-unspecified amount of the studio’s movie catalog to its app when it launches ad-supported video streaming later this year.

But Plex isn’t just looking to compete with ad-supported video services like Tubi and Pluto. Instead, the company is aiming to turn its app into a kind of one-stop-shop for digital media, capable of serving up anything you might want. To that end, Plex has plans to begin reselling video subscription services via its app, and add transactional VOD, in the first half of 2020.

“You shouldn’t have to go to a lot of different apps to get the content you care about,” said Plex CEO Keith Valory in a recent conversation with Variety. “This is going to be the one place for the media that matters most to you,” added the company’s vice president of marketing Scott Hancock.

Plex executives know that they will never be able to offer access to everything you might want to watch — Netflix originals in particular will likely not be available any time soon. However, they are confident that they’ll be able to serve up much of the rest, including movies, TV shows, podcasts, news and webisodes. “75-85% of the content you care about, you’ll get in one beautiful app,” Valory said.

A Masterplan for Digital Media, 10 Years in the Making

This goal of becoming the premier destination for consumers’ digital media needs has been a long time coming for Plex. Originally launched as a hobbyist project to develop software for media center enthusiasts, Plex incorporated as a startup 10 years ago this December. The first couple of years, Plex developers focused on building some core functionality for users with existing digital media collections.

Key to this has long been the Plex Media Server, a piece of companion software Plex users are running on their home PCs, network-attached storage drives or similar devices. That server helps organize digital media libraries, and is capable of streaming content from someone’s home to a Plex app on their phone, or from their home office PC to the Roku Plex app in their living room. “The first three to four years was all about building the underlying infrastructure,” recalled Valory.

In the following years, Plex focused much of its energy on extending its reach, launching apps for mobile devices, smart TVs, game consoles and streaming boxes at a rapid pace. And over the last three or so years, Plex has been adding a number of new content sources to its app, including free news videos, web shows, podcasts, subscription music streaming powered by Tidal, and over-the-air broadcast TV with DVR functionality.

The latter has been a hit with cord cutters. “That’s been a big chunk of our growth over the last couple of years,” said Valory. Plex has yet to announce its number of monthly active users; executives only told Variety that the company had 20 million registered accounts, and that the app is being used by “millions and millions” of people. Those claims don’t sound very far-fetched: On Roku, Plex’s app gets more usage than Spotify and ESPN. On Android, it has been installed more than 10 million times.

A Media Startup That’s Actually Making Money

Those numbers are especially remarkable considering that Plex has been running a very lean operation. Plex has around 100 employees, but most of them work remotely from all corners of the world. The company’s headquarters in Los Gatos, the small town south of San Francisco that also has long been home to Netflix and Roku, is housed in an unassuming two-story building that once housed a local real estate agent.

Over its first 10 years, the company raised just $11 million in funding. And for some time, it has been operating profitably. “We built a business that’s growing, that’s self-sustaining,” said co-founder and chief product officer Scott Olechowski. “We haven’t had to go raise silly money to get this done.”

Plex makes most of its money to-date with the Plex Pass, a subscription tier for users who want to access premium features that include the ability to record over-the-air television, download media to mobile devices for offline viewing and more.

It added an advertising component when it acquired news video startup Watchup in early 2017, and integrated personalized news feeds into its app. And more recently, Plex struck a deal with Tidal to integrate the music service into its app, and resell Tidal subscriptions to its users.

As part of that deal, Plex is also bundling its own Plex pass with Tidal’s $20 high-definition music subscription plan. Executives told Variety that they considered adding similar bundles once they launch subscription video services within the Plex app next year.

Plex Won’t Abandon HTPCs After All

One of the reasons for the success of the Plex Pass is the unusually tight bond between the company and its community. Plex users are some of the company’s biggest ambassadors, who help each other on sites like Reddit to get the most out of the app, and use word-of-mouth to grow its user base. Plex has been fostering this by using the Plex Pass as a kind of VIP membership level, regularly giving paying users first dibs on the latest features.

However, that bond has also led to friction in the past. The latest example for this was a decision to phase out support for so-called home-theater PC (HTPC) set-ups, which are essentially PCs directly connected to TVs for media consumption. Coinciding with the introduction of a new PC app, Plex announced earlier this month that it would end HTPC support early next year.

That announcement was met with protest from a small but vocal group of Plex early adopters. “There is a group of people who really want to use it in that mode,” said Hancock. In the end, Plex relented, and announced that it would support this use case “for the foreseeable future.” “We are now actively investigating the best way to continue supporting HTPCs as a platform,” the company wrote in an updated blog post.

In his conversation with Variety, Valory went out of his way to guarantee that the company would also continue to support its existing infrastructure and apps going forward. “We’re still making a bunch of investments in the server,” he said. “There is no additional end of life (announcement) on the horizon.”

Building Something Even the Haters Will Embrace

Another point of tension has been that some of Plex’s users utilize the app to collect and play content they may have downloaded from file sharing networks or other unlicensed sources — something that recently led a writer for The Verge to conclude that “Plex makes piracy just another streaming service.” Unsurprisingly, Plex executives rejected that notion. “We are iTunes, we are not Napster,” said Valory.

“We’re not actually helping you find content that you shouldn’t have,” added Olechowski. “We’re as guilty as the Mac itself or Windows itself.” He said that Hollywood has been largely understanding this distinction. In preparation to the launch of ad-supported streaming as well as future implementations of transactional video-on-demand, Plex has gone through security audits with all of the major industry players, he explained.

Part of Plex’s value proposition for the entertainment industry is that it will be able to connect the dots between different types of media. Today, Plex already presents trailers and extras related to movies and TV shows, and information about upcoming gigs as part of its music section.

In the future, it wants to suggest that users check out the soundtrack of a TV show, subscribe to a podcast related to a TV show, or watch ad-supported sequels to a movie via its upcoming streaming integrations. The ultimate goal of this is to allow users to go deep on the subjects they’re interested in, said Olechowski. “We want to become the place where fans go.”

There is a chance that adding Hollywood content — and the DRM technology necessary to secure it — will also rub some of Plex’s early adopters the wrong way. Plex executives stressed that users could completely customize their app, and always opt to not see any of the new content additions. They also promised that DRM would never have any effect on users’ personal media libraries.

Still, Olechowski seemed cognizant that there nonetheless could be some backlash. “Anytime we do anything, there are some who don’t like what we do,” Olechowski said with a sigh. “It doesn’t matter what it is. And it’s a vocal minority, every single time.”

However, he seemed confident that the even naysayers would eventually come around, especially once the company adds large amounts of free movies from major studios like Warner Bros. “There’s a lot of great content,” he said. “I’m pretty sure even the haters will use it.”