Hulu causing big media to rethink free content?

This “tug of war” has a familiar ring.

The L.A. Times has a lengthy story laying out the increasing concern cable companies are feeling over the rise of Hulu, a free video site packed with premium content introduced to the public by NBC Universal and News Corp. a little more than a year ago.

Essentially, the idea of putting cable programming on a free Web site, supported only by advertising revenue, has cable companies wondering if that might not be the beginning of the end of their business model. In essence, giving away what for years you has been sold at a handsome profit is asking customers to cancel their subscriptions to cable or satellite television. Why buy the cow …?


This existential conundrum bears more than a passing resemblance to the debate over the past missteps and dark future of the newspaper industry. A new, more user-friendly distribution model begins to chip away at what had been a well-established and highly profitable business model.

Content creators are compelled to put their work online, where free is the law of the land, because that’s where consumers expect to find it. Then all of a sudden expensive-to-run businesses find that online advertising is a pale echo of the traditional format.

So there is a broad-brush parallel. But TV is a little more complicated than the newspaper sector. In the case of cable, there are the distinct (but related) stakeholders in the form of providers (Time Warner Cable, etc.) and programmers (HBO, etc.).

And Hulu’s got them both worried. The Times story cites many examples of cable networks (including some owned by Hulu’s founders) pulling programming from the site for fear of cannibalizing their TV audience. While the story doesn’t purport evidence that consumers are cancelling their cable subscriptions in any significant number, it does note that that providers have been pressuring networks to limit availability of their programming on Hulu.

But just in case, cable companies are leaning toward some type of authentication model for premium content on the Web, making the free, online version available only to TV subscribers.

“It wouldn’t make a lot of sense to give away a pay channel and try to make it up with advertising,” Time Warner Chairman and CEO Jeffery Bewkes said at an event in Washington last month.

“We don’t have to charge people extra,” he added. “We’re not trying to make the Internet not free. We’re just trying to say if you use it for free, you ought to get what you’ve got in your home.”

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