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Summary:

Hulu has been a great service for viewers, offering the ability to catch up on shows the day after they’ve aired online. But based on reports of deals it’s negotiating with broadcasters, Hulu might make users prove they’re cable subscribers to do so in the future.

Jason Kilar_ CEO of Hulu10344

In all the talk over what Hulu will look like in the future, who would buy it and what they would actually be getting, details around the online video provider’s new deals with its broadcast content partners have begun to leak out.

For consumers that rely on the service for catching up on their favorite TV shows, all news coming out of those discussions is bad news. For instance, Variety reported that a new deal with Fox would keep popular TV shows like Glee and Family Guy on the service in exchange for a heavier ad load appearing alongside those episodes.

But the bigger story might be that Hulu’s broadcast partners are asking it to begin verifying that viewers are cable subscribers in order for them to get next-day access to episodes on the site. Buried within yesterday’s LA Times article on a possible sale of Hulu comes this blurb: (hat tip to Peter Kafka for pointing it out.)

“Changes in the familiar Hulu service could also make the company less attractive to a buyer. For example, Hulu’s owners are pushing for the free service to require users to prove they are cable or satellite TV subscribers before they could gain next-day access to current shows, said two people privy to the discussions. Otherwise, they would be forced to wait eight days to catch up on programs they’ve missed, they said.”

So let’s break this down. If you want to watch broadcast content on Hulu in the future, you may have to either:

  1. Pay to be a cable subscriber
  2. Pay to be a Hulu Plus subscriber
  3. Wait a week to “catch up” on shows you’ve missed

It’s not terribly surprising that broadcasters would begin implementing TV Everywhere-type authentication on Hulu. In January, we argued that providing such capabilities would help provide peace of mind to cable companies, increase retransmission fees broadcasters can collect, and could just be Hulu’s best chance for survival.

That said, even though TV Everywhere services like Comcast’s Xfinity Online and HBO Go have gotten consumers used to the idea of signing in to watch on-demand programming they already pay for, there are some clear problems with this plan. For one thing, while most consumers nowadays pay for cable to get access to broadcast shows, most don’t have to: these shows are available for free, and in HD, through over-the-air signals. In that sense, the broadcasters are asking Hulu to create a pay wall for content that they already give away for free.

On top of that, not every cable provider is ready or capable of providing authentication for its viewership, and even when it is, those services aren’t always seamless. Hulu’s authentication roadblock could end up needlessly disenfranchising viewers who actually do pay for cable, but don’t have access or can’t figure out how to access Hulu with their cable login.

And finally, there’s a whole class of users that for whatever reason don’t pay for cable at all. Adding authentication is the type of decision that will drive them to piracy or to other types of content, which is bad for an industry that wants to monetize as many eyeballs as possible. If Fox, for instance, wants to increase revenues by showing more ads on Hulu, setting up a roadblock to viewership is precisely the wrong way to make sure those ads are actually seen.

  1. Dear hulu,
    If you do this I will pirate instead of paying for your crap service that still has ads. I refuse to pay and watch ads.

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    1. When did people start thinking that paying for a service means that it’s ad free? Look at cable TV, magazines, and both paper and online newspapers for how it’s generally done.

      You are underestimating how much money it takes to produce this content. Your subscription dollars are not enough.

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      1. While I agree with you I do have to say that when cable TV came out the whole premise of you paying a monthly fee was so that there was little to no advertising. If you didn’t mind the advertising you could just watch OTA programming.

        When you think of that, then you start to realize how ridiculous it is that commercials are much more frequent and cable prices have skyrocketed (satellite has gone up too but not near cable rate increases).

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      2. When did companies start thinking that they don’t have to listen to consumers. When I look at the papers and magazines, I see an industry that has been decimated over the last ten years. When I look at cable TV, I see an industry that’s very likely peaked at the top, so while you do cite nifty little examples, you’re also overlooking the fact that the consumer is now in charge. If Hulu isn’t going to provide a satisfying alternative to piracy, then Kyle is well within his rights to seek out a better user experience.

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      3. I think you all make good points. The overarching problem is without ads, these services would cost a lot more. I’m not sure the consumer is ready to put up the extra cash not to have ads. But I am all for choice. If they could make two pay tiers, one with ads and one without, then the consumer could make the choice.

        And I’m with most other people, I hate ads too.

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  2. Maybe they can just pack Hulu with 20 minutes of ads in an hour program… wait that is Network TV!

    I recently went to Ireland (Yes it was awesome!) and while relaxing at night I did watch some TV. I would say there is 1/3 or 1/2 as many ads during their programing (which is like 90% American shows). Family guy dips to black, you think there is going to be a commercial break, Nope the shows fades up and keeps on trucking!

    Lesson of the story, we will continue to put up this sh*t because it isn’t like chubby America is going to band together and demand anything better (yeah folks, we are tubby bastards). Speaking of ads, there was no plastic signage on metal poles anywhere over there! You don’t realize how surrounded you are with marketing junk until you see a country without it. Why am I here?!! Ship me back!

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    1. Biggest difference is with live sports. Europeans won’t tolerate the ad loads that Americans will.

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  3. So they’re positioning Hulu as the “oops, I forgot to set the DVR” streaming site?

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  4. In our April 2011 Couch Potato Report, Online and Traditional TV, and Movie Distribution (which GigaOm interviewed us on) we posit that Hulu will move towards a TV Everywhere model and will increase ad minutes. Please see convergenceonline.com for a Report sample.

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  5. Taking the time to learn about bittorrent is so worth it. Don’t have to worry about any of this.

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  6. Dear Kyle,

    I dropped a $60 per month DirecTV subscription that also included commercials for a $8 a month Hulu+ subscription with even fewer commercials. Get over it.

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    1. This entire thread is academic. The masses will download and/or stream illegally the moment Hulu requires authentication.

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  7. While I agree with you, I do have to mention that when cable came out people payed subscriber fees in order to do away with most or all advertising.

    When you think about that, you then start to realize how ridiculous cable prices have become and there’s way more advertising then before.

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    1. You’ve got your history wrong, Kyle. Cable was originally introduced as a way to deliver traditional broadcast television to (primarily) rural areas where OTA signal reception was problematic. It later expanded to cities where tall buildings and density often interfered with reception. It wasn’t until HBO came along much, much later that anyone introduced a cable channel with little or no advertising. Ad-free and load ad-load channels have never been more than a small slice of the cable TV pie.

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  8. 2 steps forward, 1 step back. Looks like I’ll be downloading my shows again. I’m not paying more to watch more ads.

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  9. a la carte is the future. I have a pecking order, Zune (Usually more current shows available), Netflix, Hulu. I would pay $2 to watch a show without ads many times. I don’t want to pay $100 to get the scyfy channel and BBC, I don’t want 50 religious stations, I want to watch my shows when I want. The technology is there, though usually illegal unless you are willing to wait a day or two. I have this to say to the networks, the first networks to put shows up the same day they appear in cable will make bank, the rest will be left behind. Stop feeding outdated ideas, move to the future, embrace technology and make it work. Think of it, ScyFy is usually on 2nd or 3rd tier cable, that means you are paying for 100 stations you don’t want to get 1 or 2, not offer direct payment by the show, get real statistics on how much your show is worth and who is actually watching what. Your show runs across from a big hit, no problem, if someone likes both they will buy both. Sure those 100 or so channels no one cares about will suffer and go out of business, but that is what it is all about anyways. This is not a new model, it is a proven model. The Guild, a very popular show (never aired on cable). Get with the times and you may survive the decade.

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  10. Mitch Thompson Monday, June 27, 2011

    Dear Hulu (and content providers).

    Thanks, I’ll wait the 8 days for the next episode of my favorite shows. It’ll be just like when I DVR’d the show and watched it later, anyway.

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  11. I subscribed to Hulu in its 1st year and was more than happy to pay when Hulu+ came about, the current max of 1:00 of ads(not in all breaks) is still less than the cable or OTA networks and many of the network sites have ads, one(the CW) has as many as the on-air feed. Over two years ago I ditched my cable-co’s $85.00/month preferred customer plan that gave me–at that time, every premium channel, every HD channel, every digital channel and their lousy music channels. I was paying for stuff I didn’t care about and would never watch. For me, how I enjoy movies and TV now is pretty close to an “ala carte” model. And, I still get OTA, when the weather’s good. So I can watch the one sports event I care about–the Superbowl. There’s more programming available on line than I could ever watch for a lot less money. On Hulu I’ve discovered recent shows I couldn’t watch when they were in production and I watch it all on my own schedule.

    There were already some changes on Hulu beginning with the NBC-Comcast merger talks that are now in full effect. Shows on USA that over the past 2-3 years ran every episode next day, now run the first 1 or 2 episodes next day, then require a 30-day wait to watch remaining episodes in the current season. It is the same on the USA site. So, it’s good to have alternative services available. I’m “law-abiding” so I fill that time with Netflix(streaming + 1 DVD), my own library of favorites, some of the freebies on YouTube(some of the flicks are so-o bad they’re hysterically funny!) and a few other sites, as well as the occasional iTunes movie rental. $8.00/month for Hulu+, 10.00/month for Netflix +1 and all the other free content I can find–including some of the networks own sites, is less than my parents paid for only 40 cable channels that included 1 HBO & 1 Showtime channel in 1985.

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  12. Hulu is pathetic. Where the hell do they get off charging when you can virtually go anywhere to watch free TV. ANYTIME ANYWHERE. All I have to say is Project Free TV puts Hulu to shame. Bunch of idiots, I hope they go bankrupt. Get with it, on idiots will pay for free TV.

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