Last Updated Aug 18, 2011 5:29 PM EDT
This is Hulu's first foray into backing its own long-format programming, rather than gathering up what it can from the major TV studios as well as odd bits from around the world. But it's yet another example of the future of video entertainment, in which the old guard loses control of what consumers watch, new alliances form, and outsiders go in.
They want to be in pictures
It's not a first. Netflix (NFLX) snagged House of Cards from director David Fincher -- director of Fight Club and The Social Network. Google (GOOG) plans to put upwards of $100 million into new programming for YouTube.
A price tag of $100 million is a lot of money, but the old line studios have made it clear that they want more money from streaming services, especially if they cut in on pay TV audiences. The studios are already rethinking immediate streaming access to programming, making services like Hulu and Netflix wait more than a week before given them the same content. Studio execs think it's smart because they want to keep cable and satellite broadcasters happy.
Life's too short not to have powerful enemies
But what they'll do is create the first significant competition they've had. The streaming services have a different business model and can be successful with more niche programming than the studios can manage.
Netflix may become a TV cavalry, rescuing shows that networks cancel. That strategy shows how the difference in business models can work to New Television and Movie's advantage. A network or studio must get a big audience for a show because there's not only the cost of the production, but the immense overhead these companies carry. Fail to get the ratings and suddenly a program becomes My So-Called Show.
Streaming services have far less overhead and the Internet is ideal for catering to a smaller but rabid fan base. Not only would a Netflix or Hulu get a concentrated and devoted audience to either pay for subscriptions or watch commercials (what other choices do they have?), but it expands the process of luring audience from a cable/satellite-centric experience.
Suddenly, just having certain shows helps acquire subscribers, perhaps millions of them, while cutting down the roughly $15 per head acquisition cost that Netflix, at least, sees. Numerically, the shift from pay TV to Internet streaming is still small. But it's about to get a lot bigger.
- Netflix Earnings: Taking on Cable Costs a Whole Lot
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- Google Likes Hulu, but Really Lusts After Its Network Backers
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- Why Netflix Users Cut the Cord: Cable Isn't Worth What It Wants