The bids are in: how Hulu might change under new management
Hulu, the popular video streaming service, is up for auction, and bids have been made. The site, currently co-owned by 21st Century Fox, the Walt Disney Company, and Comcast, has received bids from DirecTV, AT&T, and Time Warner Cable -- among others -- for upwards of $1 billion. Once the winner is selected, however, how will Hulu's users be impacted?
The most pressing issue is that the current owners plan to limit their licensing deals when the new buyer steps in. According to The Wall Street Journal, "The owners have faced a conundrum during the sale process: content-licensing arrangements that are too narrow reduce the site's appeal to potential buyers and make it harder for the current owners to recover the hundreds of millions of dollars they invested in the site. But giving Hulu's new owners too much control over the networks' online-programing rights could reduce the networks' ability to generate money from other content buyers."
This has apparently been a point of contention for the bidders, who are understandably interested in maintaining the draw of Hulu -- same-day TV episodes. But, if the current owners have their way, there will be three restrictions:
1. Restriction of certain shows on Hulu Plus
NBC, ABC, and FOX want to limit the availability of their prime shows on Hulu once the new buyer takes over so that they can get higher prices from competing Internet services (like Netflix and Amazon Prime) as well as cable companies with on-demand programming.
2. 30-day delay for Hulu Free
The current owners also want to institute a 30-day delay for the programming offered via the free, ad-supported version of Hulu.
3. Network programming
Bidders wanted access to NBC, ABC, and FOX programming for "at least three or four years, but the broadcasters insisted on a two-year deal for Hulu Plus and a five-year deal for content on the ad-supported service..."
Assuming all of these restrictions stay, Hulu will be fundamentally changed as a service. The $7.99/month Hulu Plus service would have restricted access to prime network shows, Hulu Free users will have to wait 30 days for access to NBC, ABC, and FOX programming, and after two years, contracts will expire and the availability of network programming will be up in the air.
This could drastically transform Hulu's user base, particularly those already wondering if Hulu Plus is worth its current $7.99 fee in the face of arguably better services like Netflix. If the bidders are forced to take content on less-than-current terms, I would be very surprised if Hulu could last. As it is, the general consensus is that the amount of programming just isn't worth the cost. When those restrictions are coupled with the possible 30-day delay on programming for Hulu Free, the site's offerings will be... sparse.
This is on top of the fact that Hulu still isn't profitable. In 2012, Hulu generated almost $700 million in advertising and subscription revenue, but is still spending more than they're bringing in. Over the last six years they've amassed four million subscribers, and offer shows from over 480 content providers. Unfortunately, it still isn't enough to move them into the black -- so why are these companies even interested in a service like this? Cable providers may be interested in using Hulu as the basis for a TV service that runs over broadband. Other bidders, like DirecTV, could use it as a packaged add-on with a standalone subscription service option. In essence, it will be very interesting to see how the new owners transform the service, especially in light of all of the possible content restrictions.
Even though we don't know who won the auction yet, as Engadget says, "We'll have to wait and find out who had the best pitch before we move on to the next step -- deciding if whatever Hulu becomes under new ownership is still worth visiting." That's the key, whether or not the licensing changes will simply make Hulu not worth using when compared to its already popular competitors.