CenturyLink shed more light on its over-the-top video plans, noting Wednesday on its Q2 call that those coming products will feature “skinny” bundles that include the local broadcast TV networks.
CenturyLink has been conducting a small OTT pilot under the Prism Stream brand, but plans to move ahead soon on “more robust trial,” Glen Post, president and CEO of CenturyLink, said on the earnings call.
Post said those skinny bundles, delivered to connected devices via an app, will include the broadcast networks, “which is a little different from a lot of…the offers that are out there today. We think that will be a differentiator as we bring those local channels with the over-the-top cable channels.”
That bigger pilot, slated for launch toward the end of 2016, aims to “really test the market in terms of pricing” and to penetrate areas that complement CenturyLink’s more traditional Prism TV offering, added Dean Douglas, the company’s president of sales and marketing.
CenturyLink is cutting separate distribution deals for the OTT product. Programming deals for CenturyLink’s Prism TV service are purchased through the telco’s partnership with the National Cable Television Cooperative (NCTC), a group that cuts programming and technology deals for an array of largely independent MVPDs.
“They key for getting the skinny bundles to work is having the right level of programming agreements in place,” Aamir Hussain, CenturyLink EVP and CTO, explained. “When we launch our TV over-the-top offering, that offering [is based on] new agreements with the broadcasters. And those agreements are not bound by any caps or by franchise agreements. So these are non-franchise-type agreements. They allow us to pretty much have a nationwide reach.”
Hussain also stressed that CenturyLink’s core skinny packages will be complemented with access to multiple genre-based packages. “That will have a very, very positive impact on our ARPU at a cost point, which makes sense for the consumer,” he said.
CenturyLink is just one of several service providers that plans to launch or has launched OTT services. Dish Network has Sling TV, and today announced new skinny-focused options under the “Flex Pack” brand for its satellite TV platform. AT&T, meanwhile, is preparing to launch a set of DirecTV-branded OTT services in the fourth quarter. Comcast has argued that the economics of an OTT service don’t add up. But the MSO will have an indirect line into the OTT arena as Hulu, which is partly owned by Comcast, prepares to launch a live streaming TV service early next year.
CenturyLink will use OTT to deliver video services outside its traditional footprint. Today, CenturyLink is bundling DirecTV where it does not offer Prism TV.
CenturyLink ended Q2 with 311,000 Prism TV subs, up from 258,000 in the year-ago quarter. It has launched Prism TV in markets such as Minneapolis/St. Paul; Seattle; La Crosse and Platteville, Wis.; Columbia and Jefferson City, Mo.; Tallahassee and central and southwest Florida; Las Vegas; central N.C.; Phoenix; Omaha, Neb.; Denver and Colorado Springs, Colo.; Portland; and Salt Lake City.
CenturyLink dropped 65,000 broadband subs in Q2, ending the period with 5.99 million.
Post said broadband numbers dropped in part to a focus on acquiring “higher-value bundled customers and less emphasis on standalone broadband customers.”
He said a “significant percentage of the churn” came from standalone broadband customers that are “less loyal than our traditional bundled customers.”
On the financial end, CenturyLink posted revenues of $4.4 billion, down from $4.42 billion in the year-ago quarter, alongside net income of $196 million (36 cents per share), up from $143 million/26 cents.
The company expects Q3 revenues of $4.35 billion to $4.4 billion, and earnings of 52 cents to 57 cents per share.