Peter Kafka

Recent Posts by Peter Kafka

How to Handicap Hulu, Even Before a Sale

Hulu is a great place to watch TV shows you missed the night before. But what if you couldn’t do that? Or what if you could do that, but only after you proved you were a cable TV customer?

That’s the scenario the Los Angeles Times floats at the bottom of its Hulu-for-sale piece today:

Hulu’s owners are pushing for the free service to require users to prove they are cable or satellite TV subscribers before they could gain next-day access to current shows, said two people privy to the discussions. Otherwise, they would be forced to wait eight days to catch up on programs they’ve missed, they said.

The industry term for this is “authentication,” and I’ve heard a similar story this month but haven’t been able to confirm that it’s true. If it is, you can go ahead and mark Hulu’s sales price way, way down.

That’s because tying Hulu to cable subscriptions is going to knock out a big chunk of the service’s viewers. Some of them will be people who don’t pay for cable and don’t have any plans to do so. And some of them will be cable TV subscribers who should be able to watch shows but can’t deal with the hassle of proving that they’re entitled.

It’s theoretically possible for Hulu and the cable guys to build a seamless, pain-free authentication process. And that will get more likely if they could do a deal with, say, Facebook (as Time Warner and Verizon have discussed). But I wouldn’t count on it any time soon.

In the meantime, authenticated Web TV services aren’t impossible to access, but they’re not easy (try signing up for the WatchESPN app and you’ll see what I mean). And Hulu is all about easy instant gratification.

Why would Hulu’s owners push to make the service less attractive? The justification I’ve heard is that most Hulu viewers are paying for TV anyway, so this really wouldn’t be a big deal.

But the real answer is that this is meant to appease cable TV providers who are paying Hulu’s owners — via “retrans” deals — for the rights to provide the shows that Hulu is giving away on the Web. And it’s also meant to protect the value of broadcast TV advertising, since the ad business still doesn’t value a Web eyeball as much as one that watches on a TV.

Again, this is the kind of tension between business models that has been a problem for Hulu almost from the get-go. And it has been the source of many of the disagreements between Hulu CEO Jason Kilar and his owners for some time.

And again, it’s the kind of problem that any potential Hulu buyer has to consider: The people who own Hulu are the ones who provide it with almost all of its killer content, and they’re not gung-ho about making the thing work. What happens if they don’t own the company at all?

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik