Can Comcast-NBC play nice with Hulu?
Comcast managers said Thursday, following the company's announcement it had acquired a controlling stake in NBC Universal, that it will be business as usual at Hulu, the joint venture operated by NBC Universal, News Corp., and Disney. Ever since rumors of the acquisition began to swirl in September, questions were raised about whether Comcast would try to kill Hulu to discourage cable customers from dropping their subscriptions. Some critics of the deal said Comcast could also limit access of NBC Universal's TV shows and films to other popular distributors, such as Netflix and iTunes. It appears that some of this may happen and some of it may not.During a conference call, Comcast executives said they anticipate that some content will appear online at Hulu, and other shows will appear on TV Everywhere, the Hulu competitor that Comcast, Time Warner, and other cable companies rolled out last summer. "Comcast is too deep into their Internet-related investments for me to believe that they are hoping to clamp down on consumer enjoyment of NBC content," said James McQuivey, a digital-entertainment analyst for Forrester Research. "They have spent far too much money buying companies and developing infrastructure to suggest they are going to make it a 'my-way-or-the-highway' distribution scheme. It would be absolutely foolish to buy an expensive property like NBC Universal and then cut the legs off of it." Hulu's freedomOkay, so Hulu won't disappear once the acquisition--which still needs government approval--is finalized, but Hulu fans are concerned about how the site will develop. Many had long hoped that the service might one day offer a better selection of full-length feature films and past episodes from hot TV shows. Now, Hulu offers only a smattering of films, and to watch episodes of a TV show from a prior season, a fan must plunk down for a DVD. Most importantly, Hulu fans want to continue watching without paying subscription fees, which has been discussed publicly by some of Hulu's backers, including Jeff Zucker, NBC Universal CEO. Free content was the promise that made consumers so giddy about Hulu and YouTube not that long ago. Cable subscribers were thrilled by the possibility that they could watch the best shows and films without having to pay fees. The NBC Universal acquisition is just the latest sign that this dream might be in jeopardy. "The goal of Comcast is not to make it hard for people to get content. The goal of Comcast in the future is to make it really easy to get content and that's what people will pay for."--James McQuivey, Forrester analyst Paul Gallant, an analyst at Concept Capital's Washington Research Group told The Washington Post that Comcast could "harm consumer welfare by preventing Internet video from becoming a viable cut-the-chord threat." "It's a little bit Pollyannish to say 'I can cut cable because everything I want is on the Internet,' because it isn't," McQuivey said. The big knock on Hulu and other legal video sites is their selection of films and TV shows is still pretty poor. Under Comcast ownership, Hulu will unlikely be unable to change that. More probable is that Comcast will use NBC Universal's content to sweeten its offering to paying subscribers."The goal of Comcast is not to make it hard for people to get content," McQuivey said. "The goal of Comcast in the future is to make it really easy to get content and that's what people will pay for. "In the future, Comcast isn't going to say 'Here's 500 channels delivered to one set-top box,'" he continued. "In the future, they'll say 'Hey, you know that subscription you're paying us every month, that buys you red-carpet access to the best content. No matter what you want to watch we have the license to it. We're going to deliver it to you online, to your game console, to your connected television or Blu-ray player.'"But what about Netflix and iTunes? Doesn't the Comcast-NBC Universal deal put them in a position of competing with a major supplier? Is Netflix friend or foe?Netflix looks less like a DVD-rental business and more like the Web's version of a cable company with each passing day. For more than a year now, Netflix has streamed movies over the Web to anyone who pays the company's subscription fees. CEO Reed Hastings raised the stakes in the competition with cable companies by partnering with set-top box makers and TV manufacturers to create systems that enabled Netflix customers to watch streaming films on their flat screens. Jumping to the TV set was huge for Netflix. No longer latched to the PC, the company was now threatening cable companies on their home turf. But if content is king, then Netflix was offering only a duke. Just like Hulu, Netflix offered cable subscribers a cheaper alternative. Just like Hulu, Netflix's library lacks new and hot titles. Without the best content, the cable companies still hold an advantage over Netflix. Since Netflix is now a direct competitor to Comcast and other cable companies, it will be interesting to see what kind of terms the Web's No. 1 rental store gets from the new NBC Universal? "Comcast has to offer the world, where as Apple only has to offer what's cool." As for Apple, it's highly unlikely that Comcast will tinker with NBC Universal's arrangement for digital download sales at iTunes. The very public quarrel between the companies over pricing in 2008 is behind them. In that case, Apple gave NBC Universal more flexibility over pricing. Apple CEO Steve Jobs has shown respect for Hollywood's lucrative practice of giving exclusive film access to certain distribution platforms over specified periods, called "windows." Jobs is also purveyor of the Web's most successful video-download store, so the relationship will likely remain unchanged. But McQuivey sees a potential problem for Apple should the company decide to broaden its video business.Apple could become an over-the-top pay TV provider," McQuivey speculated. "Apple should say 'You buy an Apple TV from us and pay $28 a month and we'll give you access to this number of downloads and all of this TV-network content for free. They are one of the few companies that could really create this amazing little business model of mixing Internet downloads with Internet streaming with over-the-air HD broadcast...Lets be honest, Apple users have fairly shared tastes and as a result it would be easier for Apple to serve its customer base this way than it is for, say, Comcast. Comcast has to offer the world, where as Apple only has to offer what's cool." It should be noted that in every scenario McQuivey discussed, he mentioned price. In his vision of the digital future, Internet distribution looks a lot like cable.According to McQuivey, "All of these Internet delivery solutions are going to face some kind of reckoning over the next couple of years. It shouldn't come as a surprise that Hulu is going to evolve to include some kind of pay model."
