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