Markets

Hulu On Rewind: Comcast/NBC Universal Deal Changes the Game

By Catharine Taylor

Updated on: January 20, 2011 / 11:53 AM EST / MoneyWatch

There's a lot of fine print in the Federal Communications Commission's approval of Comcast's acquisition of NBC Universal. Reading between the lines also yields this: that this may be the beginning of the end of Hulu.

Because of potential conflicts over distribution, the FCC has stipulated that the merged entity has to relinquish board approval, and any say in how Hulu is run, while at the same time having to supply content to Hulu on par with what its other two owners -- ABC/Disney and News Corp. -- provide to the service. It is also prohibited from obtaining detailed information about the venture, receiving only what PaidContent calls "aggregated" financial statements and information that affects how it manages ad inventory.

So what Comcast/NBCU ends up with is ownership in a venture it doesn't know much about -- and that's bound to cause issues, particularly when Comcast has its own streaming venture, xFinity.TV (aka Fancast), which is partly what led to the FCC imposing these restrictions on the merger to begin with. Given that streaming video is a core component of broadcast TV's future, expect NBCU/Comcast to relinquish its stake, presumably, at that point, being able to do whatever it damn pleases with its online video strategy.

Yes, there could be regulatory hurdles there as well since the FCC will be watching whether the company is playing fair in distribution policies very closely. However, it seems apparent that since one other prominent network -- CBS -- doesn't distribute to Hulu, it would be difficult to make the case that, if Comcast/NBCU pulls its stake, it would still have to distribute on that platform, as long as it wasn't steering viewers only to distribution platforms it owns.

NBC was already showing signs of un-Hulu-friendly behavior before the deal was approved: one, it was the first of the Hulu partners to pull back ad inventory from Hulu to sell on its own; two, NBC recently struck a deal with Netflix to stream all 35 seasons of Saturday Night Live, including current episodes the day after air. The deal also includes dozens of other NBC shows.

Which is not to say that the other Hulu partners are isolating their content on the site, but it does show the tenuousness of the Hulu idea itself, created a few years ago at a time when the broadcast networks figured that banding together on the wild-and-crazy Internet was better than going it alone. Once that theory falls apart, the partners will probably go hunting for distribution options that offer consumers more content than Hulu does. It should go without saying that a video site with two broadcast partners is less powerful than one with three, and that a streaming service with video content from sitcoms to movies from a multitude of providers is more powerful than a site primarily dedicated to good, old-fashioned TV.

You may think that to talk about dissembling Hulu at this point is getting ahead of the game, and, indeed, its unraveling will probably take a few years to play out. But I see the writing on the wall concerning Hulu, penned, perhaps inadvertently, by the FCC.