Image via CrunchBase
The news today that Hulu is looking to partner with cable companies highlights the fact that there are getting to be too many players in the internet television value chain.
Hulu’s idea is that they become a portal for cable companies’ content in a system where cable subscribers get a special password enabling them to watch their cable content via the Hulu streaming service. For example, if you were a Comcast subscriber and Comcast struck a deal with Hulu, you’d be able to see all of Comcast’s shows on Hulu.
It is pretty easy to understand why Hulu wants to move this way (more people and more content on their site) but for cable companies the pros and cons of this vision are more balanced.
Cable companies know they need to get to the web, so their choices are either to deal with Hulu or build their own similar service. Going with Hulu has the advantages of leveraging their technology back end and arguably cable subscribers who use Hulu anyway would be more likely to remain with their cable comapny if they could view both Hulu’s offerings and their cable content in the same place. The obvious disadvantage is that the cable company’s relationship with the customer become more distant which weakens their position with content owners and over time exposes them to the risk of being cut out of the value chain altogether.
Going with their own offering carries the risk that they might not do it well and is likely to be more expensive.
Not an easy choice, but if I was running a cable company I would build my own service, because in the long run I can’t see that there is space for both cable companies and services like Hulu in the market. In my simplified view of the world there is the consumer, the content, and the company/service that links the too together. The linking company providing access (historically via cable, and in the UK via satellite) and billing (subs and/or pay per view) – Sky in the UK is a great example of such a company. I don’t see two companies sharing that middle ground.
This could take a long time to shake out though as large subscription bases mean high switching costs for both consumers and content owners. Furthermore many US cable companies are also content businesses which further complicates the picture and will slow down change.