Time Warner Inc. wants a stake in Hulu, and an end to current-season streaming

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Netflix may get all the headlines, but Hulu has always offered something the ‘Flix never has: next-day access to a wealth of popular TV shows. Thanks in part to its trifecta of network owners, including Disney (ABC), 21st Century Fox (Fox networks), and Comcast (NBC/Universal), Hulu carries current seasons of multiple network and cable TV shows, often available to users the day after air. Unfortunately, the cozy relationship with its owners that’s kept Hulu afloat so far, could be what sinks it — especially if Time Warner Inc. gets its way. 

According to The Wall Street Journal, Time Warner Inc. wants to radically change Hulu over from the service that its over 9 million users (and growing) know and love now, into something that better serves its own agenda. Citing unnamed sources familiar with negotiations, the report claims that Time Warner is currently in talks to buy a 25 percent equity share in Hulu, with a goal of eventually shifting the service away from airing current seasons of network TV shows.

The news is just the latest symptom of a high stakes game of chicken playing out between new streaming media empires like Netflix and those tied to the old pay-TV model — with Hulu finding itself lodged somewhere uncomfortably in the middle. As an increasing number of so-called cord cutters abandon cable and satellite subscriptions for streaming services, it’s not just cable companies losing out on all that green. Content producers — who make most of their profits by selling their wares to big cable and satellite companies — are also feeling the squeeze.

Time Warner thinks Internet TV is just fine — as long as users still pay for cable.

While Time Warner Inc. is no longer directly connected with the cable giant of the same name, the company is plenty motivated to put an end to services like Hulu and its extensive library of current-season shows, now also available commercial-free. The massive media conglomerate owns a mountain of content-producers, including HBO and a load of channels under the Turner Broadcasting banner, all of which gain the lion’s share of their profits from the traditional pay-TV system. And as streaming services continue to gain ground — and subscribers — they pose an ever-growing threat.

Time Warner’s fears are very real, as traditional media companies (including Hulu co-owner Disney) have seen their stock slumping for months on what appears to be little more than the growing worry over how severely streaming services could disrupt cash flow in the future. With over 70 million users worldwide, Netflix is the most prominent offender, but Hulu, Amazon, Sling TV, and others are also real threats.

That puts everyone involved in the current entertainment paradigm — especially Hulu’s current owners — in the rather awkward position of having to decide what to do about the very streaming services they’ve helped bolster with thousands of hours of licensed content. The Journal claims that Hulu’s co-owners have been delaying finalizing licensing agreements controlling how Hulu airs current-season shows for months now. The former agreement requires them to make nearly all current seasons of shows produced in-house available to the service directly after air.

Hulu has been continuing under its former licensing agreement via small extensions, but it’s clear the networks are still trying to forge a new path when it comes to airing new seasons. And if Time Warner jumps on board, that path looks much more likely to go toward cutting new seasons out altogether. According to the report, Time Warner believes airing seasons of current TV shows on Hulu (or anywhere else) without the need for a cable subscription is “harmful to its owners,” and the company has expressed its desire to remove current TV seasons from the service altogether, though it was reportedly not a condition of its acquisition bid.

If Time Warner were to gain a stake in the service and successfully stop Hulu from airing current-season episodes, it would likely have a detrimental effect on subscriber numbers. Hulu has made strides toward liberating itself from its reliance on current TV series, including an exclusive contract with AMC networks, a successful bid for the Seinfeld library, and popular original content like the Amy Poehler-produced comedy, Difficult People, but these are nascent efforts. Without the lure of new TV, Hulu may not be able to keep its fans.  That’s probably what Time Warner is counting on.

Time Warner Inc.’s bid for Hulu, it seems, is just one part of its plan to subtly push viewers back towards the pay-TV paradigm. While the company would hold back its own series on Hulu until after each season airs, the Journal suggests it could try and set up a paywall allowing cable subscribers to access current seasons on Hulu. And the company’s ultimate goal appears to be finding new ways to nudge viewers to TV Everywhere apps and other streaming services that must be authenticated via cable subscriptions. In other words, Time Warner thinks Internet TV is just fine — as long as users still pay for cable.

Interestingly, Time Warner has (perhaps reluctantly) embraced stand-alone streaming in the past, including its HBO Now service, which allows cord cutters and “cord nevers” to purchase a $15 monthly HBO subscription without the need for cable and satellite. But, as the motivations behind its Hulu grab suggest, the company is still highly invested in keeping the status quo in place for as long as possible — and, perhaps eventually, to find a way to do away with stand-alone streaming altogether.

At the very least, the purchase of Hulu appears to be a step in Time Warner’s overall plan to keep pay-TV relevant — and necessary — for years to come.

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