Point: When Disney Met Hulu…Winners and Losers

This morning Disney announced it would be joining Hulu, posting full-length episodes of current content from ABC primetime and daytime, ABC Family, SOAPnet and the Disney Channel on the site. The deal, details of which had leaked out over the past couple of months, includes a 27 percent stake in Hulu for Disney, putting it on equal footing with founders NBC and News Corp. So let’s break down how this affects the web television distribution landscape:

Winners

Hulu gets a new two-year lease on life. This was an important re-up, because the site’s incredible momentum had put it on unsure footing, with its content-controlling parents doling out programs more sparingly and pulling it off of cable disintermediary Boxee. Yes, it’s only two years (see Chris’ counterpoint to this piece), but the site will be much more entrenched by then.

Disney, without even giving up all of its content (no ESPN!), gets equal footing with NBC and News Corp in the venture, which took on the initial risk and pain of incubating Hulu. However, the deal takes some of the wind out of ABC.com’s sails. ABC had until now run the only network site that was the exclusive provider of its own shows, and regularly led all networks in terms of on-site streams.

Losers

This deal reflects poorly on YouTube, since the Google-owned site quite clearly had the opportunity to sign Disney in the last couple months and only managed to rustle up short-form clips. YouTube’s statement on the matter is: “More content coming online in more places is a win for consumers and provides further validation of the growth of the online video market.” But the fact is, the site will need to figure out a way to monetize what it does best, and that’s not licensing premium content.

Every other video portal has simply stagnated. YouTube continues to hold onto massive market share — 40.9 percent of U.S. video streams, at last count. Meanwhile, Hulu has showed how a clean UI and some semi-fresh TV content simply tears up the charts. Everyone else just seems irrelevant at this point.

NBC and News Corp had a good idea and gave Hulu the tools and freedom it needed to execute well, but now it seems they won’t get anything special except a line in the history books for their troubles. On the other hand, Hulu allows them to stay relevant; in today’s unstable media world, it’s something that’s actually working.

Paid services from Amazon, iTunes and Netflix will also be negatively impacted as people see Hulu as a more comprehensive content offering, especially considering it’s free. Apple, especially, loses some of the luster of its special relationship with Disney, where ailing CEO Steve Jobs is a board member.

Move Networks was previously the technology provider for ABC.com’s walled garden of full-length episodes. Now Move’s player will be just one of the ways to access ABC content.

The big question marks

Comcast and other cable companies are seeing their core paid distribution businesses get more and more threatened by Hulu, as it starts to fully become the TV receiver for the Internet age. Will the cable companies head to court, like in the UK, where broadcasters’ joint venture Project Kangaroo was deemed to be anti-competitive? You can be sure the giant is no longer sleeping.

Another take was offered by Forrester analyst James McQuivey to CNET (which is owned by CBS): Hulu could actually provide more than a blueprint for cable companies’ own premium video services; it could manage their online content relationships and distribution for them.

“Comcast can tell NBC and News Corp, we want to put your Hulu system in front of our subscribers,” McQuivey said. “But we want to give our customers more. If Hulu is posting four episodes of a show online we want our subscribers to have 12 episodes. I’m 90 percent certain sure these conversations are already happening.

A Comcast spokesperson told us recently, “Generally, I think that we will continue to have a relationship with Hulu if their venture continues to have exclusive super distribution on broadcasting programming from NBC/FOX and potentially others.”

But the real pressure is on CBS. It’s now the last of the big broadcast networks to hold out on Hulu. The hangup seems to be a case of missed connections at this point, since in terms of strategy CBS is right in line with Hulu. In fact, CBS Interactive President Quincy Smith has publicly praised Hulu while pursuing an even more liberal strategy of widespread premium content syndication. If it can get in on Hulu with the same deal Disney got, it seems pretty silly — and incongruous with its own strategy — for CBS to hold out.

Notably, while these deals are worth a lot in the public eye, they don’t add much to the bottom line — yet. Currently the only things with significant dollar tags are pre-existing revenue streams and the promise of what Hulu could be.

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