Hulu Cozies Up to Cable, Telcos

Hulu is getting ready to jump into bed with cable operators and other pay-TV providers.

According to The Wall Street Journal, Hulu LLC is in talks with Comcast Corp. (Nasdaq: CMCSA, CMCSK), and Cox Communications Inc. , as well as AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ), about bundling its online video service with traditional TV fare. The news, which comes just months after the Internet streaming company canceled yet another auction for sale, gives some indication of what its two controlling owners, 20th Century Fox and the Walt Disney Co. (NYSE: DIS), have in mind for the company's future. (See What Now, Hulu?)

Hulu reportedly wants pay-TV providers to add its over-the-top service to existing video bundles and make Hulu accessible on subscriber set-tops. There were similar reports recently that Netflix Inc. (Nasdaq: NFLX) has been in discussions with operators about porting its app to cable boxes too, although Comcast was quick to downplay those rumors with word that there are no plans for a partnership any time soon. (See also Netflix-MSO Deal in the Works?)

The situation is different for Hulu, however. Because Hulu is owned by programmers who are already invested in the pay-TV model, there may be some incentive for the two groups to find a way to work together. Comcast is also a part owner of Hulu, but has no say in the strategic direction of the company under regulatory rules imposed when Comcast acquired NBC Universal . It's unclear if Comcast would have an interest in bundling its cable services with Hulu, given the huge resources the MSO has already invested in its own video-on-demand library.

Hulu, which now has more than 4 million subscribers, generated nearly $700 million in revenue last year. After bowing out of acquisition talks in July, the company's owners invested another $750 million in the video service, with the goal of adding more content, funding new marketing and technology initiatives, and attracting new talent. (See Hulu Still Flirts With Time Warner Cable.)

Hulu still faces serious competitive threats, however. In particular, it faces competition from Netflix, which is investing billions in content and boasts more than 40 million of its own paying customers, including nearly 30 million in the US.

— Mari Silbey, special to Light Reading Cable

albreznick 11/17/2013 | 6:10:27 PM
Re: Hmmm....What's the Point? I think there's probably more to this, Dan. Hopefully we'll find out what that is as the negotiations proceed.  
DOShea 11/14/2013 | 8:45:38 PM
Re: Hmmm....What's the Point? Just seems like this is a bizarre move unless they come up with a lot more of their own programming, or find some other kind of supplemental value to deliver with cable. Maybe it's their only option, given that sale plans didn't pan out.
albreznick 11/14/2013 | 5:30:56 PM
Re: Hmmm....What's the Point? Good point. Well, Hulku has started doing original productions and has talked about doing more, especially with the fresh $500 million influx. Hulu might also offer a better user interface and better program packaging. Will be interesting to see as the details get sorted out.  
albreznick 11/14/2013 | 5:27:57 PM
Re: What do consumers get out of this arrangement? Good question, Karl. I'm not sure what they get. Msybe a little more convenience because they'll presumbly have one-stop shopping for video entertainment. But probably not lower prices or more choices.  
albreznick 11/14/2013 | 5:26:09 PM
Re: Who Next? I agree, Phil. Just a matter of time. I wouldn't be surprised if they had already started lining up right behind Hulu.
TaraSeals 11/14/2013 | 1:19:07 PM
Hmmm....What's the Point? Sooooo...I have to say, I don't understand why in the world any pay-TV operator would want to incorporate Hulu. That service's main value proposition is the fact that it gets current-season TV episodes thanks to its parents-- which is great for an OTT service, but redundant for a pay-TV operator, who is likely already trying to lure their subs to their own TV Everywhere and on-demand services. Hulu would be redundant (any cable subscriber gets Hulu's TV fare anyway) and potentially even cannibalizing. At least Netflix has solid original content and an increasing amount of exclusives to bring to the table.
Phil_Britt 11/14/2013 | 11:46:49 AM
Re: Who Next? With the popularity of YouTube and some of the fare there like Funny or Die, it's doubtful, in my opinion, that it would be far behind. If there's money to be made, expect YouTube to be there, at least in my opinion.
KBode 11/14/2013 | 11:45:31 AM
What do consumers get out of this arrangement? I've struggled to see the purpose of this.

It seems like Hulu is really just a glorified ad for cable TV service, designed to remain that way because of the fact it's owned by broadcasters. Its catalog is spotty, and entire season runs of shows they enjoy heavily promoting in their main streaming screens are often difficult or impossible to find when you go digging.

I understand that Hulu gets significant exposure before the eyes of cable subscribers tinkering with their set tops, but what exactly do consumers get from this new offering?
albreznick 11/14/2013 | 11:15:43 AM
Who Next? First, Netflix. Now, Hulu, Will it be YouTube's turn next?
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