CBS May Head to Hulu, Making the Video Site Even More Formidable

There's one class of rumor that is unsubstantiated talk about what a company might do. It becomes a different animal with the CEO confirms it. The other day at the Goldman Sachs media conference, CBS (CBS) head Les Moonves said that the network might bring content to Hulu.

This is a big deal that would move Hulu further toward becoming the online place to go for high-end television programming, cause grief for Apple (AAPL) and cable carriers, and potentially offset the problem that a Comcast (CMCSA) acquisition of NBC Universal (GE) could present the site.

In 2007, Hulu started as a joint-venture between NBC and News Corp. (NWS), which owns Fox. In 2009, Disney (DIS) took a stake and made ABC programming available. That left CBS (which also owns BNET) as the only holdout.

There are other online video sources that people frequent, as the comparative traffic chart below from (AMZN) shows:

YouTube (GOOG) is the big power in online video, and yet it still doesn't make a profit and doesn't have access to full television programming. Veoh has some older TV shows, but it's a thin and shallow collection. Apple wants to become the master of all media sales, and yet Hulu is already far more popular, at least measured by traffic. (It isn't clear, though, whether direct traffic from iOS devices would register.)

With all four networks providing programming, Hulu would be a one-stop shop for mainstream video entertainment that was unavailable elsewhere. But there are complications:

  • Many people might have a big incentive to cut their ties to cable television and simply download what they wanted, possibly paying a monthly fee for Hulu Plus. That's bad news for the cable providers.
  • Although Hulu has said that HTML 5 doesn't currently meet its customers' needs, enough developments on that end could make major network programming available to all manner of mobile devices, including iPads and iPhones. That could undercut a revenue stream that Apple wants for iTunes, especially as only ABC and Fox have signed deals, and Fox has only done so on a temporary trial.
  • If Hulu nabs enough regular users and doesn't run with HTML 5, that could be an even bigger problem for Apple, as iOS doesn't support Adobe (ADBE) Flash. Android and Microsoft (MSFT) Windows Phone 7 do. Could content restrictions push consumers to choose particular mobile operating systems? Perhaps.
  • Apple CEO Steve Jobs is the largest single shareholder of Disney, which owns ABC, so he clearly has immense pull. And yet, if people move online for video, it's unclear whether Disney could walk away from a site like Hulu, even to make Jobs happy.
  • Barring unexpected changes from regulators, Comcast (CMCSK) will own a majority stake in NBC Universal and could push to reduce or eliminate the amount of programming the network makes available as a way to slow down consumer defections from cable.
Complexity aside, adding CBS would be like an instant muscle transfer to a weightlifter. However, the network will take its sweet time on any decision. As Moonves said, "Guess what? If we call up next week or in a couple months, they'll accept our content."