It's good to be a programmer, good to be a distributor and doubly good to be both.

Backed by broadcasters, Hulu LLC made its name as an aggregator of network content. Offering ad-supported video alongside premium subscription content, the company has steadily increased its subscriber base and expanded its reach through new distribution channels. Most recently Hulu added General Communication Inc. (GCI) (Nasdaq: GNCMA) to its list of operator partners that include Hulu access on the TiVo set-tops they lease to subscribers.

And Cablevision Systems Corp. (NYSE: CVC) even offers Hulu as an individual channel on customer set-top boxes using ActiveVideo 's Cloud TV platform. (See Hulu Joins Cablevision Lineup.)

But if Hulu wants to be a TV channel, then doesn't it make sense not to compete with the companies who might distribute that channel?

Apparently that's not the way Hulu sees it.

Hulu is reportedly preparing a subscription online video service for early 2017. The service isn't designed to offer the full cable TV bundle, but it is being touted as a mid-tier subscription option for viewers who want access to some traditional TV content, but not all. (See Hulu Eyes Cable-Like Bundle – Report.)

As Walt Disney Co. (NYSE: DIS) Chairman and CEO Bob Iger said on yesterday's earnings call (transcript courtesy of Seeking Alpha), "Hulu's become an important investment for us, not just as a distributor of the programs that we make, but ultimately as a buyer of original product and ultimately as a distributor of our channels. And we think they have a great opportunity to become an OTT MVPD because they can leverage their current user base."

If that doesn't sound like competition with the cable operators Hulu is also trying to sell to, I don't know what does.

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But Iger is adamant that competing with its customers doesn't pose a problem.

"I also know that there have been questions asked about what the impact of going into the distribution business is on our current distribution partners," said Iger on the earnings call. "And to that I would respond... there are a number of our current distribution partners that are in the content ownership, content creation business, most notably Comcast and its purchase of NBCUniversal. So we don't think that there's any negative impact whatsoever to us, going into the business of distributing our channels."

Here's the issue. Even if Hulu can get away with a little friendly "coopetition" in the short term, the company will ultimately dilute the value of its content if it spreads distribution across too many channels, and particularly if it starts to take a cut of those distribution revenues as well. Maybe that's the only option Hulu and other programmers have. After all, broadcasters grew fat on a dual-subscription business that paid them through advertising and licensing fees earned through cable distributors, and that model is slowly falling apart.

But by competing with its customers, Hulu can only hasten the end of lucrative content licensing arrangements. Why should cable companies spend a lot on Hulu's content -- either its OTT package or the channels that Fox Broadcasting Co. and Disney contribute to that offering -- if Hulu is going to undercut those deals with a new, more full-featured service of its own?

It's hard to see how the numbers add up.

— Mari Silbey, Senior Editor, Cable/Video, Light Reading