Monday, February 20, 2017

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Tech Talk

Hulu invites cable to the stream

2/1/2017

tech-huluIt is official: Streaming has won; cable has lost. Yes, cable still exists, but it is dying on the vine. The NFL — television’s most consistent and powerful ratings engine — has been struggling to reach two-thirds of its audience average of the last five years. ESPN — the most expensive channel cable providers carry — has seen advertising rates precipitously drop as subscribers downgrade their cable packages. Finally, after a decade of pleading for cable and broadcast partners to join up, Hulu has signed some of the biggest studios to join its streaming service.

Crazy as it may seem, streaming broadcast quality content has only truly been an option for 10 years. In 2007, Netflix turned the switch on online movie streaming, and in the same year, Hulu opened the world to on-demand TV streaming. Streaming video had existed for several years before Netflix and Hulu, but most of the content came from amateur content creators on sites like YouTube or through piracy such as Bit Torrent. Hulu and Netflix legitimized streaming in both quality of media available and technology, delivering online content beyond personal computers to television sets and mobile devices.

As early business innovation and consumer adoption goes, no one became rich immediately from streaming. Hulu had lucrative deals with NBC, FOX and ABC, while Netflix had a patchy collection of box office hits and a landfill-worth of B-movies. Fast forward to the start of 2017, and Netflix accounts for nearly one-half of U.S. Internet traffic. Hulu is about to announce a massive streaming offering with the “who’s who” of television channels. The biggest defection from the #NeverStreaming camp is CBS, the last broadcast holdout.

Even with three of the four major broadcasters signed on, a vast collection of popular movies and advertising revenue, Hulu has struggled for nearly its entire existence to be profitable. Yet, after a decade of struggling, with the announcement of adding CBS, its NFL and NCAA basketball tournament coverage, FOX News, Disney Channel, CNN, TNT, TBS, Cartoon Network and National Geographic, Hulu seems poised to become the next Comcast.

As much as consumers decry expensive cable bundles, expenses to copious streaming services add up quickly and deliver far less content. So what is the new model? Streaming bundles. Hulu’s new model offers a gaggle of classic cable content providers and will come at a cable-like cost — roughly $40 per month. Hulu will still have its $10-13 per month offering skinny packages of broadcasters and movies only. But for the full content experience, subscribers are basically replacing the payee line on their cable bill with Hulu.

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So why did CBS cave after 10 years of standing its broadcast ground? The best guess is the failure of its proprietary streaming service, CBS All Access. For two years, CBS has been trying to lure viewers to its CBS-only streaming channel with a base price of $6 per month. As it turns out, $6 is a little steep for a channel viewers are used to receiving over the air for free. So, joining with Hulu is a classic case of, “If you can’t beat them, join them.”

So why Hulu? Dish Network has been offering a simple streaming bundle for two years with decent success. Twitter is dying to make a movie into media streaming. YouTube’s streaming audience is dozens the size of Hulu and has proven itself to be the marketplace for millennial eyeballs. The answer is that Hulu is willing to cut traditional cable carriage fees to content providers. The reason Hulu’s new bundle costs subscribers $40 per month is because it is desperate to carry the content. Now we just need to wait to see if cable-over-the-Internet will work, or if this is the last gasp of a bundled world. ♦

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