Will Hulu Require a Cable Subscription?

Hulu has made some sizeable waves in the television industry pond. The service makes “catch-up” episodes of current television shows available for free; all you have to do is sign up and endure a relatively few commercial interruptions during the show. (The service also has an extensive list of old show episodes and some mediocre movies, but those don’t seem to get as much attention as the current shows.) The fascinating detail about Hulu is that it is owned by News Corp (which owns the FOX networks) and Disney (which owns ABC), and Comcast (which owns NBC). Somehow these three network owners have created a tiger that they now hold by the tail, trying to figure out what to do with it.

So now the New York Post has published a story that Hulu may start requiring its users to log on using their cable or satellite television subscription account information in order to access some of the content that’s available on the site. (Yes, the Post is also owned by News Corp.) In the industry parlance, this is known as “authentication.” I don’t usually spend much time discussing rumors, but this one appears to have stirred up a lot of debate. Some even predict doomsday scenarios if such a practice should come into effect. After all, it is the people who don’t want to have a cable bill who have made Hulu a success, right?

Well, I don’t think the sky is falling yet. First, 80% to 90% of U.S. television watching households already have a subscription to a television service. If you’re looking to drop that and replace it with Hulu, then yes, we have a problem. But most people use Hulu like a super-DVR of sorts, where you can decide to watch a recent episode of a show even if you forgot to record it.

Keep in mind that streaming video over the Internet is new, and the networks aren’t sure what to do to replace the money that they’ve lost due to declining advertising revenues. Authentication may be a way to bolster their demands for greater retransmission fees from the subscription services.

Also, it’s important to remember that Hulu already has an authentication requirement. If you have an account with certain services, then you get to watch some FOX show episodes the day after they air. If not, you have to wait eight days. That went into effect last summer, and it does not appear to have had a negative impact on Hulu’s growth.

It’s early days yet and there’s still a lot of stumbling around in the dark to be done before we settle on just what this new world of video entertainment will look like (and we figure out who is going to pay for it). My advice is to be patient, and let the various services know what you like and what you don’t like. I expect that it will only get better as we go along.