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Originally published Sunday, November 24, 2013 at 8:04 PM

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Hulu seeks cable partnerships as it tosses TV disrupter strategy

The media companies that now own the popular service may now move to offer it through pay-TV distributors.


Los Angeles Times

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The online video site Hulu once had ambitions of ushering in the future of television by shaking up the status quo.

But under its new management, the site will throw off its old mantle of TV disrupter as it seeks to work in partnership with cable and satellite companies.

Veteran Fox television executive Mike Hopkins took over as chief executive less than a month ago, an appointment that signaled the media companies that control Hulu wanted to turn the popular service into a feature offered through pay-TV distributors.

“When you hire a guy who’s spent his life in distribution, it probably signals that they’re looking for a second revenue stream in that area,” Needham & Co. media analyst Laura Martin said.

Such a move would preserve existing business relationships between pay-TV operators and Hulu’s owners — 21st Century Fox, Walt Disney Co. and NBCUniversal parent Comcast — that funnel billions of dollars a year into corporate coffers, and perhaps even play a hand in shaping the dramatic changes to the television industry that some see as inevitable.

The newly installed Hulu executive team is believed to already be pursuing deals with cable operators to offer subscribers access to Hulu as a way to watch current shows online, according to several people with knowledge of the situation.

The team also may seek to use these same pay-TV providers to sell subscriptions to Hulu Plus, which extends TV viewing to Internet-connected game consoles and televisions as well as to smartphones and tablets.

The play-nice-with-the-cable-guys strategy marks a shift in emphasis for Hulu, a site that launched in March 2008 with big ambitions to change the TV world by providing free online access to popular TV shows.

The service, which won praise for its ease of use, caught on quickly with users. Within a year, Hulu ranked second only to Google’s YouTube in online video views in the U.S., according to measurement firm comScore.

Hulu succeeded a little too well for the cable and satellite companies that pay for the right to carry TV programming, and viewed Hulu as a threat.

Suddenly, entire seasons of such popular cable network shows as “It’s Always Sunny in Philadelphia” were abruptly taken off the site. By July 2011, Fox began to restrict next-day streaming of its prime-time shows to customers of cable and satellite companies — and impose an eight-day delay on Hulu.

The site’s media owners — which compete for TV ratings — found it hard to work as partners on the venture, and elected to put their problem child up for sale.

When owners 21st Century Fox, Disney and Comcast abruptly canceled a proposed Hulu sale last July, and announced they would instead invest $750 million into the streaming service, no one was more surprised than the bidders.

At the time the sale was canceled, Hulu’s corporate parents said that the avid interest from traditional pay-TV distributors and digital media companies underscored the site’s value. It would be foolish to give away such a gem, they said, for some other company to exploit.

“Any buyer would have wanted to disrupt the traditional TV business and really rock the boat,” said Mike Vorhaus, head of the digital media practice at Frank N. Magid Associates. “Keeping Hulu ownership with the current owners is less threatening.”



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