This troubles Time Warner, who is considering taking an equity position in the digital video service. Seems that Time Warner wants Hulu to be more like Netflix, which typically strike deals with networks for less valuable episodes of previous seasons of TV series.
But Netflix knew all along that bigger action came with creating original programming to grab big headlines, strong positive reviews, and award nominations and wins for the likes of “Orange is the New Black,” and “House of Cards.”
Major TV media companies, who are owners of Hulu, sell episodes of new and old series to both Netflix and Hulu. In addition to these deals, broadcast networks rerun episodes of current TV series on their linear TV schedules in off periods, where they are still key, albeit small, revenue generators.
Cable networks do that and more, rerunning episodes of original cable TV shows in the same week after their initial airing. Advertisers can typically buy an original premiere episode of show and three or four reruns in a given week period in deals that “cume” a week’s worth of viewing of a particular episode.
Here’s the rub for Time Warner in becoming a possible equity partner in Hulu alongside Comcast Corp. (through NBCUniversal), Walt Disney, and 21st Century Fox: It wants to eliminate the current season of TV episodes.
Why? Long-term cord-cutting cable network issues, for one. Taking away the current season episodes on Hulu would see possibly higher ratings for dramas/comedies on traditional linear TV networks -- like Turner’s TNT and TBS -- where TV advertising revenue is still a big deal.
Why haven’t the other owners of Hulu been concerned about this? Netflix has 45 million U.S. subscribers; Hulu has 10 million. Perhaps Hulu’s influence on cord-cutting alone is small. And when it comes to watching TV shows, the owners of Hulu get a monthly fee from consumers -- $7.99 for a limited amount of commercials or $11.99/month for no commercials.
Time Warner would get the same. But it senses this comes at a price: possibly future lower advertising revenues on its linear TV networks. Seems it isn’t ready to give that up.