Cable networks are stuck between a rock and a hard place. Retransmission fees, once a source of steady revenue, are now the focus of relentless combat as cable companies try to keep costs down and customers from bailing on TV plans in favor of getting their video through the internet. So they need to stream wherever they can, and Hulu apparently wants to be their streaming provider of choice. But it’s missing a crucial piece that might make it indispensable: Local broadcast.
The plan, reported on by the Wall Street Journal, is to have a package of networks available to livestream for $40 a month. So far, it appears two of Hulu’s three co-owners, Disney and Fox, are on board, while Comcast has yet to weigh in. It seems likely Comcast will go along, however, as it wants to stay out of trouble with the FCC.
The killer app here is Hulu, taking a page from the dearly-departed Aereo, is including a cloud-based DVR recorder, which might be the killer app, especially for sports fans. Unfortunately, it also takes a page from somebody else, the cable companies and its competitors in this arena, and has a “ballpark” price of $40 a month. You won’t have to be a Hulu subscriber, but that doesn’t quite take the sting out of that price.
The issue is that these prices, largely mandated by cable companies, are designed to be competitive with buying cable bundles, which is contrary to cutting the cord in the first place. The TV industry would like to believe customers are leaving their cable subscriptions because the technology is outdated, but that’s a belief that’s hard to maintain in the face of steadily rising cable bills and ongoing service frustrations. Hulu’s executives are bound, to some degree, by this belief, but there’s a way for them to stand out from the pack.
How? By offering a budget package that just streams local broadcast affiliates, priced similarly, or lower, than similar “skinny” packages offered by cable companies, or even offer the streams of affiliates and regional channels to current subscribers for a small price bump. Most viewerships are so atomized at this point that viewers are drawn to shows, not networks. This is why Game of Thrones and Daredevil command such cultural attention, despite only being in 40% of households in the first place. That holds especially true at the local level, especially with sports and local news content.
But there’s yet to be a truly effective way to live stream these channels for those that want to do so. Even the aforementioned Aereo was limited to over-the-air broadcasts in selected major markets. Sports fans, in particular, don’t have many options if they want to enjoy games without cable, although increasingly the major sports leagues are offering competitive packages for hardcore fans (like MLB.tv, which can cost as much as $24.99 a month). Similarly, local news programs are largely using a hodgepodge of apps, social media, and YouTube to reach their audience, and being able to stream their content in the right markets would be, for them, a strong upside. Paired with DVR functionality, that would essentially put many affiliates right back on the radar for cord-cutters.
There are challenges, of course, the most obvious being how revenue would be split between affiliates, and how regions are defined. There are technical challenges, as well, especially on the sports level, as many leagues tightly control which games can be seen in which media markets. Any sort of local support from Hulu would, theoretically at least, offer an ability to get around that. Aereo tried to solve this problem by only allowing you service if your credit card’s zip code matched the broadcast area of local affiliates. Finally, there’s the issue of retransmission fees, a problem so sticky Comcast is trying to freeze out some affiliates and build their own stations.
Digital streaming is powerful, but if it is ever going to a true alternative to cable, it’s going to have to address the gaps that have arisen with the way that it has grown and the way that some content is sold. Hulu should aim to fill those gaps, and in a cost effective way, if it wants to stand out from the crowd.
(via PCMag)