FX+ is growing while staying tethered to pay TV

FX+ first launched last year on Comcast's X1 platform. (FX)

Two and a half years ago, FX Networks CEO John Landgraf indicated the network was in no hurry to go over the top. "We need to fix the existing business model," Landgraf said at the Television Critics Association Press Tour in January 2016.

The OTT landscape looks a little different than it did at the beginning of 2016, though. HBO Now had more than 5 million subscribers as of February 2018, according to Bloomberg News; Showtime's OTT offering has around 2.5 million. Hulu passed 20 million subscribers this year for its three products (limited ads, ad-free on-demand, and live TV).

Enter FX+, the company's ad-free streaming service. FX+ launched on Comcast's Xfinity platform in September of 2017, becoming available to 21 million Comcast customers. A little less than a year later, in August 2018, FX+ became available for customers of most of the other big pay TV players.

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Unlike the OTT plays listed above, FX+ is still tethered to the pay TV bundle; you have to be an Xfinity or Spectrum or Cox customer in order to even subscribe to FX+, making it not so much a traditional OTT play as a "with-the-top" play, an ad-free add-on.

AMC, FX's main ad-supported cable rival, also went live in July with its own tethered-to-the-bundle ad-free streaming service, the $4.99-a-month AMC Premiere.

What changed in those two and a half years? Is there room in the OTT ecosystem for this kind of product? And, perhaps most importantly, is this a step toward the Great Unbundling?

"We've long understood that a linear channel only is an imperfect expression of the FX brand," Landgraf told FierceVideo. "We were trying to figure out how to constitute the FX brand in its entirety, which is a nonlinear thing. You're talking 1500 episodes of television—what, you're going to run them all on a loop on a channel?"

The FX Now app, which requires authentication through a subscriber's pay TV provider, had already been built by Fox's Digital Consumer Group, so the basic infrastructure was already available. What FX needed to launch FX+ was the library.

So the network got to work reacquiring the streaming rights to all of its series—including oldies like The Shield and Nip/Tuck. That took a while, but FX+ subscribers get access to just about all of FX's original programming. (There are a couple of shows still locked up in other deals, like Justified, which is at Amazon for another two years, and two seasons of American Crime Story.)

With Comcast, Landgraf said, there was a coincidental "meeting of the minds." As the biggest pay TV provider in America, it was a natural fit.

"We were so excited to work with John," said Daniel Spinosa, vice president of Video and Entertainment Services at Comcast Cable. "What we really want to do is make sure if you are interested in something you can find it easily and then decide what you want to do. If you're interested in FX, you can watch it ad-free [with FX+]. We're trying to say you should have those options. In that construct, we feel we can offer customers a valuable service."

For Erik Brannon, associate director of TV Research at IHS Markit, FX+ feels similar to both ESPN+ and WWE's app.

"As new households form, they are so used to not watching commercials, thanks to Netflix and YouTube and Hulu, or a reduced ad load, they're not as tolerant," Brannon said. "It's in that context that FX+ is quite insightful."

For Comcast, said Spinosa, the strategy is to become "the aggregator of aggregators." One stop—and search—for all your entertainment needs, from cable channels like FX, AMC, and HBO, to streaming services like Netflix, which is now fully integrated into Comcast's Xfinity X1 platform. Other pay TV providers have been making similar moves, a la Optimum placing Hulu in its channel guide.

Because of the ad-free product's relatively recent launch to non-Comcast customers, hard numbers on FX+'s uptake are scarce. Landgraf said each week FX sees steady increases, particularly when it launches new shows, like Mayans MC.

Though FX+ is essentially a table-stakes play, Brannon does wonder if the $6-a-month price is perhaps a bit too high, particularly when compared to the bonanzas of other streaming services.

"It's a very good price and a good utility to subscribe to a giant streaming service like Netflix or Amazon or Hulu," Landgraf said. "It's a great bargain." But these big-box streamers can feel to consumers like wandering through endless aisles; FX+, he added, is a more curated experience, despite not being controlled by an algorithm: "That plays a different but vital role in the ecosystem."

You should never trust anyone who tells you they know what the future holds. That advice goes double when there's a massive $71 billion acquisition on the horizon. But is it possible that FX+ will morph into a true OTT play, available to anyone with an internet connection?

"I personally feel like we're going to come unbundled sooner or later," said Brannon. "Not in the next five [years], but within the next 10, for sure."

The official party line at FX regarding the untethering of FX+ from the bundle is the equivalent of a corporate shrug—by necessity. "How [our programming] gets delivered to the consumer is something I have a keen interest in and some strong opinions about," Landgraf said. "But ultimately, the answer to that question will be determined by our new owners."