The rumors that Hulu may soon require subscribers to have a cable TV subscription is the perfect cautionary tale for why the companies that make and distribute content shouldn’t own the pipes that deliver that content. And if the rumors are true, it’s not just a cautionary tale, it’s the new playbook by which pay TV providers will force consumers to buy a special pipe for “the Internet” and a second pipe for TV, despite the fact that technically they are becoming the same thing.
There is no denying that as the future of television unfolds it’s disrupting the traditional broadcast, cable TV and content creation models. And while the Senate held a hearing last week to discuss this shift, it felt like they were arriving late to the party, unaware of just how much things were changing as broadband and television converged. Instead of understanding what that convergence meant for the economics of old and new industries and what regulations might be needed to avoid protectionist behavior by pay TV providers and broadcasters, the hearing dealt more with discussions around reworking the Telecommunications Act of 1996 for the current era.
That’s not going to happen anytime soon, but I did wonder at the lack of Hulu in the conversation occurring last week at the Capitol. Netflix was brought up several times as was Aereo, both companies which are challenging the current status quo far more than Hulu has been able to. Not that Hulu didn’t have promise. When it launched in 2007 it defied expectations and was a wonderful viewing experience, especially for those of us who wanted just to get our content when we wanted it without having to plan ahead to record it or worry that we missed some window online.
But even a year ago we were saying that as a business Hulu wasn’t delivering the revenue its backers may have hoped for, and that a cable authentication model might end up making the most sense. Already Fox windows its content on Hulu, showing episodes 7 days later for customers who aren’t already
DirectTV Dish subscribers. So if it went further and mandated that subscribers could only access the content if they were already a pay TV subscriber somewhere, it would really be a win for everyone except the consumer.
Hulu to start requiring Pay TV subscription http://t.co/PWtqkHuL – Then I might ditch it all together. The cord is cut. I'm not going back.
— Steve Watt (@wattsteve) April 30, 2012
The pay TV provider wins because cord cutters like myself now have one less source of entertainment, broadcasters who back Hulu win because customers are essentially paying Hulu for the right to watch certain shows, while they are also hunting for retransmission fees for their broadcast channels on cable. They are getting paid by consumers, by Pay TV providers and they are also getting their spectrum for free even as they sue to stop companies such as Aero from making it easier for consumers to get those signals over the air. It’s also training consumers that they will have to pay extra for access to a bunch of content on their own terms.
And is all this happening because it’s more difficult or expensive to deliver TV to consumers? No. It’s actually cheaper and easier once TV moves to an IP system to deliver what people want, when they want it on demand. But once this happens, if there are no artificially created barriers in place thanks to licensing deals, deals to let content sneak around a data cap or outright packet blocking, then consumers might go over the top and along the way distort the power structure and economics of the TV industry. And no one in the industry wants that.