By Sahil Patel
Rupert Murdoch, who owns a decent portion of the global TV industry, sees the growth of Netflix and Amazon as major threats to the future health of the TV business. One way to counter that growth, he believes, is to invest more in the streaming service that the traditional-media giants already own: Hulu.
Speaking at a Wall Street Journal event last week, Murdoch said (via Deadline) that as an industry, TV needs “a competitor, a serious competitor, to Netflix and Amazon.”
The easy option is certainly Hulu, which is the go-to service for many TV viewers to watch current-season programming. (Netflix and Amazon generally have to wait a full year before being able to offer full seasons of existing TV shows.) Hulu’s ad-supported and subscription options give viewers plenty of opportunities to catch up on their favorite programming — whether it’s an episode that aired the previous night, or an entire season that they’re only now getting around to.
The problem is, as valuable as Hulu is, its owners — 21st Century Fox, Disney, and Comcast — have rarely seen eye-to-eye in how they want to invest in the service. Fox, for instance, has previously tried to window new episodes of its TV shows for an entire week before placing it on Hulu.
Murdoch acknowledge this “difficult partnership” that Hulu’s co-owners have shared in the past, but added that he feels now things have changed. Everyone is now “on the same page” and ready to drive Hulu “as hard and as fast as we can,” he said.
What that means, specifically, is for Hulu to compete with Netflix and Amazon in two key areas: licensing premium TV shows on an exclusive basis, and original programming.
Hulu has been doing exactly that in recent months. The company just announced a deal with Viacom to offer more current and past shows from the latter’s stable of TV networks, including Comedy Central, MTV, VH1, and Nickelodeon. This followed an agreement in September to bring all 17 earlier seasons of “South Park,” as well as the latest episodes from season 18 the day after they air, to the streaming service.
On the originals front, Hulu has ordered new shows from JJ Abrams and Jason Reitman in the past few months, signaling that it’s ready commit to original content at a level that Netflix and Amazon are.
Will this kind of investment help Hulu in the long run? Sure.
Where it gets trickier is whether Hulu’s growth in the SVOD space will help the larger TV industry, as Murdoch believes it could.
The main reason? It’s no secret that TV ratings are on a downward slope, as are DVD sales. TV studios have been able to offset these declines by signing lucrative syndication deals with the likes of Netflix, Amazon, and Hulu. But now these services are increasingly becoming the first choice for TV viewers to watch their favorite TV shows — which, if you’re a fan of doomsday scenarios, isn’t good news for the TV industry.
Simply put, viewers aren’t going to go back to watching stuff on TV now that they’re used to streaming them from their favorite on-demand services.
The TV studios could combat this by selling less of their programming to Netflix, Amazon, and Hulu.* But that would mean content owners would lose-out on a lot of syndication money. Plus, with Netflix, Amazon, and Hulu all giving users the chance to catch-up as well as discover new shows, TV studios and networks would also risk more ratings erosion.
Neither situation is good, as Bernstein Research analyst Todd Juenger recently noted in a report (subscription required).
Hulu would certainly allow the TV industry to maintain greater control over its content. As would network-owned over-the-top video services. But it won’t fix the larger problem, which is that fewer and fewer people are watching TV the way they used to.
* It could be argued that Hulu, which is owned by three companies that have huge TV businesses, should not belong in the same group as Netflix and Amazon. After all, money made by Hulu will find way its way to those at the top. But Fox, Disney, and Comcast certainly don’t represent all of TV.