Some Context on Potential Changes to the Hulu Business Model

Yesterday came the news that Fox, as part of its negotiations with Comcast, was moving toward a model that would require people who wanted to view its content online to provide proof that they were cable subscribers, likely through the same mechanism that HBO uses to grant access to its HBO GO site: using their cable provider login to sign in rather than a login for a specific service. That would mean that Hulu users who wanted to watch Fox content through Hulu would likely be subject to the same restriction, and Hulu appears to be exploring a cable verification login system more broadly.

There are a couple of things to consider here. It may be easy to forget this, but Hulu isn’t an independent company. It’s owned by Comcast, Disney, and News Corp, all of which are apparently going to take a larger stake in Hulu next week when the fourth company invested in the company sells back its 10 percent stake in Hulu to its partners. Whether that is a tipping point or not, it’s worth remembering that Hulu has never been about providing an alternative to cord-based television watching. It’s a way to keep as much revenue as possible directly in the pockets of content companies without an intermediary eating up the revenue and negotiating long-term content deals that could turn out to be less-than-desirable for the content companies. And in that context, it’s not really surprising that Hulu’s owners would want people to pay for every single bit of content they watch on the site, whether you’re paying a monthly fee for streaming or a cable bill.

That gets at the really interesting question: will Fox’s carriage agreement with Comcast exempt Hulu Plus? That would be a move that would still require people to pay for content promptly, but would acknowledge that some people are gone from cable and will never come back. Will, as TechCrunch suggests, a free, ad-supported option still exist, but with episodes going up 30 days after they air? It would be the kind of thing that would drive users like The Oatmeal insane, but that strikes me as completely reasonable, considering what a bargain Prime is, and the fact that content costs more to produce than many people feel comfortable acknowledging.

Either way, Hulu warned us what it was when it first launched:

Hulu has never been a challenge to the content companies. It’s their rearguard battalion, making sure the content industry gets money out of folks who go AWOL.