As CenturyLink looks to scale its new over-the-top (OTT) video service, the service provider says that it would consider working with other partners, reflecting a desire to offer its broadband base flexibility in how they view content.
Glen Post, CEO of CenturyLink, told investors during the company's second-quarter earnings call that it is talking to other established providers about partnering with another established OTT provider, but did not offer any specific details.
“We have flexible packaging including live and on-demand local broadcast, national channels, and some genre additions,” Post said during the earnings call, according to a Seeking Alpha transcript. “But we are very open to looking at other options.”
RELATED: CenturyLink launches $45 monthly OTT service in beta
In late June, CenturyLink launched its virtual MVPD service in beta called CenturyLink Stream. According to the live-streamed service’s product page, the base tier will run $45 a month and include almost 50 networks, including four iterations of ESPN, History Channel, Food Network, Viceland and HGTV.
CenturyLink Stream will initially be supported on Roku OTT devices, as well as iOS and Android mobile devices. It’s also playable on the CenturyLink player, a $90 Android-powered device manufactured by LG Electronics.
Alan Wolk, lead analyst at TV[R]EV, told FierceOnlineVideo that CenturyLink’s strategy makes sense for being an insurgent video provider whose broadband customer base is far larger than its Prism IPTV base. “CenturyLink have a unique position in the market in that they are a telco that is moving into the TV space, rather than a traditional cable provider,” Wolk said. “As such, they have many more broadband customers than TV customers—they currently partner with Direct TV to sell their service in markets where their Prism service is not available.”
Joel Espelien, senior analyst for The Diffusion Group, agreed. “CenturyLink should definitely not be trying to compete with OTT companies like Netflix,” Espelien said. “The best move for them is to do bundling or reseller deals where they get some revenue for selling services like Hulu through to their subscribers.”
Unsurprisingly, one of the reasons CenturyLink is looking at an OTT service is that it can cut content acquisition costs and simplify the customer installation process. The telco faces some unique challenges: Unlike a traditional cable operator that has well-established buying power with content providers as well as an established customer base, CenturyLink is still a new player.
“We continually talk with some of these other providers, look at the best ways we can bring that service and also other ways in working with them to reduce our content cost,” Post said. “So that will be a key objective even with our over-the-top product.”
But content is only one part of the cost equation.
Because OTT video only requires a customer to have a 10 Mbps or greater internet connection, CenturyLink does not have to roll a truck to each home to get service up and running. IPTV typically requires a 25 Mbps minimum connection and a technician to install customer premises equipment to deliver the device. While telcos like CenturyLink can leverage the existing coax or copper wiring in a home, the installation time could be even longer if the existing wiring needs to be replaced.
Post told investors, “with over-the-top product, we don’t have to make a truck roll” and thus cut the costs of deploying technicians whose time could be allocated to other service deployments.
Pivoting video approach
Although CenturyLink does not break out how many Prism IPTV service customers it has every quarter, the service provider has expressed a desire to realign its video delivery approach that gives customers flexibility in how they get video.
Besides IPTV and OTT video, CenturyLink also resells DirecTV satellite services to its customers in the markets where Prism is not present.
“We are doing a shift to pivot in our video approach and we are open to offering customers multiple video options,” said Maxine Moreau, president of consumer markets for CenturyLink, during the second-quarter earnings call. “Our Prism TV service, where it makes sense and we also resell DIRECTV, I think you're aware of, and of course, we are trialing our own over-the-top product.”
Wolk said CenturyLink’s new video service approach reflects the fact that consumers desire the freedom to choose a service that best fits their viewing habits via broadband connection.
“While CenturyLink is planning to launch Prism as an OTT service, they realize that many of their customers would rather use another service, like DirecTV Now or Sling, and that they can keep those customers by allowing them to do so,” Wolk said. “In instances where customers are looking to leave their triple play bundles on existing cable companies, having the freedom to buy their OTT service of choice as part of a “skinny bundle" from CenturyLink will be a strong selling point.”
Wolk added that CenturyLink could also use the OTT service as a way to reduce broadband churn. CenturyLink did lose another 65,000 broadband customers during the second quarter, but the telco said it expects to return to positive growth by the end of the year.
“Customers with both TV and broadband from the same company are generally much less likely to leave for another provider,” Wolk said.