Monday, October 17, 2011

The Challenge Of Owning Content And Distribution

Hulu and its owners are facing a real challenge. No one wants to pay their price and their model causes friction with their other distribution partners. Owning both content and a distribution path seems to be causing great angst. Can a distribution window be worked out that makes every one happy?

For a number of cable operators, the ultimate decision was to sell or spin off one or the other. Viacom in the 1990's sold their cable operations; Time Warner, Inc. spun off Time Warner Cable, and Cablevision spun off Rainbow and MSG (although they all share majority sock ownership by the Dolan Family). The biggest exception of this decade was the acquisition of NBCU by Comcast. And that has made content deals with other companies a more difficult one, too.

Hulu, owned by ABC, Fox, and NBC (now non-voting because of Comcast), has a difficult job of working through its content deals for streaming without overtly hurting its other cable distribution deals. But as cable embarks on a TV Everywhere philosophy, those streaming deals do cause friction. But no one wanted to buy Hulu fearing that these companies wouldn't continue to offer great content to the new owners post sale. "There are risks in keeping Hulu. The venture rankles some of its media owners' biggest customers—cable and satellite operators, who see Hulu as a potential competitor." For them, Hulu causes cord cutting. "Some media executives said there is value in maintaining a direct connection to consumers, rather than handing it off to other companies." But that would affect their subscription fees as well as the networks' current ad sales model. So Hulu finds itself stuck in a can't sell, can't compete abyss.

Can Hulu create a streaming window that is competitive yet gives their cable customers a unique window too? Is a 1 season exclusivity enough? Or does Hulu push the older shows no longer accessible on a cable network? Or has this experiment out lasted its usefulness and it is time to close the shop? Decide where your fortunes lie, as content owners or as distributors, it may not be financially in your best interest to do both.