The thing is that consumers enjoy Hulu and don’t think very much about what it represents and why it is such a bad thing. Essentially it was originally created to take on YouTube, and then as Netflix came along, it was cast more and more in the image of Netflix. Then nobody, including serial CEOs of Hulu, knew what to do with it.
It is old media trying to prevent the flood of new media onto its turf. But essentially the model whereby direct rivals – Fox, NBC and Disney put some of their TV content online is a form of market controlling collusion. This week Time Warner has been added to the mix, and since Hulu already has content from CBS’ Showtime, it only lacks Viacom and Lionsgate content for a full house of US studio outputs and major TV stations.
In Germany when two broadcasters wanted to pool their content to create an online entity, it was halted by the competition regulator, in the UK when the same was tried, the same thing happened. In the US this amounts to the four largest TV stations working in concert.
The problem in the US is that these companies do not put their entire outputs into the venture and have OTT ventures of their own which compete with Hulu, and this is very unhealthy for many reasons. For one, deals with Netflix for content are now important to all of these companies – but if they sign a “most favored nation” clause with Netflix, then how can these firms advantage Hulu in any way? The only answer has been for Hulu to create its own original content, which puts the cat among the pigeons.
Either Hulu commissions one of its parents to create content, putting the noses out of joint of the others, or it competes with all of its parents for content, and ends up selling it back to them. Confused? How do you think the CEOs have been – virtually schizophrenic.
But then when Hulu wanted to move outside the US, it found that all of the content that it was used to having access to on a VoD basis, the day after it has been on US TV, was already licensed regionally to other large, existing, old media players and broadcasters, so it could not have access, except through their licensing programs.
The natural evolution of content delivery here is from the studio to a broadcaster with content travelling free over the air; to broadcast content travelling over MSO networks; to broadcast content going indirectly to clients over the internet through online partners, and finally for content going directly from the creators/owners to consumers over the internet.
That transition has been happening for about 14 years, since it was first possible to send video over the internet in a rudimentary form, and now is in a fairly advanced condition. Broadcasters need their content back in order to offer full broadcasting services over the internet, and this is why the US is massively behind every other civilized country in moving to that last stage – direct to consumer delivery.
This came about due to fear of piracy, making it illegal initially to push streaming video over the internet, and big content wanting to retain its entrenched position. The world had OTT video, and the US only discovered it in 2015. Pretty soon Hulu will be an afterthought in the strategy of the US major content players.
Rights negotiations needed to be completely re-thought, as they have been in the US, with TV everywhere services allowing MSOs to have online rights and the latest rounds of negotiations preventing them from having exclusive rights. This has finally led to initiatives like Go90, CBS All Access and Sling TV, all of which supersede the mission of Hulu.
In the end the US major content owners cannot control all OTT video, but they can supply it, and use their brands to push each individual flavor. By having ownership stakes at risk in Hulu, we are led to situations where Hulu was put up for sale two years ago, and no buyer could be found. Why? Because no promise could be made about future licensing of content – just in case the parents’ entire business model relied on taking back control of online content at some point in the future. Also valuation was an issue, since each owner had plowed in content rights which had a certain theoretical value, which was taken at a time when there was no online content.
The issue here is partly that the US majors will end up competing with Hulu, and will be unable to give it an international existence due to their existing relationships, and if they interfere too much, and gather together into too large a group, they will be accused of anti-trust and deliberately controlling a market by acting in concert. Hulu cannot win.
Time Warner buying into Hulu merely compounds the original error in setting up Hulu. It needs “typical” OTT content licenses, on the same terms as say Netflix, and it needs to be set free. Make it public and deal with it at arms-length. All of which means that Time Warner just put a rumored $500 million into something that it will one day have to be set free. But how can it go public, if its owners plan to deprive it of content at some future date, and compete with it?
The details of the deal are that Time Warner will become a 10% owner of Hulu, joining Disney, 21st Century Fox and Comcast as owners.
In return Time Warner’s Turner sports, news and kids networks will be available live and on-demand on the new version of Hulu’s streaming service, expected early next year. The services will still come in two forms, ad-supported and ad-free SVoD. The SVoD will come with limited commercials for $7.99 a month or be commercial free for $11.99 a month.
But the danger is in this statement, that Hulu is the only streaming subscription service which offers current season content from 5 of the 6 largest US broadcast networks. And if it has not achieved this through market position, or by paying fees, then it has done it through the market control of its parents, and that’s simply illegal. How long before someone calls it out, apart from us at Faultline.