Hulu and Show­time team up to build up their stream­ing ar­se­nals as TV land­scape is re­shaped

Los Angeles Times - - BUSINESS - By Yvonne Vill ar­real

Hulu and Show­time, two un­likely part­ners in the in­creas­ingly rau­cous TV bat­tle­field, are team­ing up to build up their stream­ing ar­se­nals.

Hulu will of­fer its nearly 9 mil­lion pay­ing sub­scribers Show­time’s stand- alone ser­vice for an ex­tra $ 8.99 a month, giv­ing them ac­cess to hit shows like “Ray Dono­van” and “Mas­ters of Sex.” The deal also en­ables Show­time to tap a wider au­di­ence as it launches its own stand- alone stream­ing ser­vice next month.

This marks the f irst deal that Hulu has made to show­case a pre­mium ca­ble chan­nel, and un­der­scores the Santa Mon­ica com­pany’s ag­gres­sive push to take on in­dus­try gi­ant Net­flix. Stream­ing ser­vices are scram­bling to chase younger con­sumers and oth­ers who live in the more than 10 mil­lion U. S. homes that pay only for broad­band In­ter­net ac­cess with no ca­ble pack­age.

The pur­suit of this grow­ing au­di­ence is lead­ing to some out- ofthe- or­di­nary part­ner­ships. With the stakes so high, es­tab­lished play­ers are not afraid to min­gle with a com­pany that pre­vi­ously might have been con­sid­ered an ad­ver­sary.

“Show­time is a great part­ner and a great one to start with,” said Tim Con­nolly, Hulu’s head of dis­tri­bu­tion and part­ner­ships. “I

think we’re go­ing to learn a lot from work­ing with them, and we’ll see as time goes on whether it makes sense for us to add more.”

It is all part of a re­shap­ing of the TV land­scape in which stream­ing com­pa­nies try to mold them­selves into more eco­nom­i­cal com­peti­tors to ca­ble com­pa­nies. Ser­vices like Hulu, Sling TV and Sony’s Plays­ta­tion Vue are all try­ing to scoop up pro­gram­ming deals to stand out in an in­creas­ingly com­pet­i­tive busi­ness.

They are try­ing to at­tract a grow­ing num­ber of con­sumers fed up with pay­ing more than $ 100 a month for a pre­mium pack­age of ca­ble chan­nels. About 126,000 ca­ble sub­scribers can­celed their ser­vices in the U. S. last year, ac­cord­ing to con­sult­ing f irm Le­icht­man Re­search Group.

At the same time, the amount of video con­tent be­ing watched on tele­vi­sions hooked up to the In­ter­net has in­creased.

An es­ti­mated 29% of adults watched In­ter­net- de- liv­ered video weekly via a con­nected TV, up from 5% in 2010, ac­cord­ing to Le­icht­man.

“We are see­ing this great revo­lu­tion in the tele­vi­sion in­dus­try,” said Hui Zhang, chief ex­ec­u­tive of video stream­ing an­a­lyt­ics com­pany Con­viva. “You are still go­ing to have a so­phis­ti­cated ecosys­tem — just more f lex­i­bil­ity. There will be much more in­ter­est­ing busi­ness mod­els emerge.”

An­a­lysts say the new op­tions will en­cour­age more con­sumers to can­cel their ex­pen­sive pay- TV sub­scrip­tions, par­tic­u­larly as it be­comes eas­ier to cus­tom­ize a smaller pack­age of chan­nels. The new op­tions have prompted tra­di­tional com- pa­nies to di­ver­sify their of­fer­ings.

HBO this spring launched stand- alone ser­vice HBO Now for an ex­tra $ 14.99 a month on Ap­ple prod­ucts as well as on Dish Net­work’s Sling TV ser­vice. Sling is of­fer­ing an as­sort­ment of pack­ages at var­i­ous price points, as is tele­phone com­pany Ver­i­zon, which this spring rolled out its own mix- and- match pro­gram­ming op­tions.

Show­time, which is owned by broad­cast­ing gi­ant CBS Corp., also is scur­ry­ing to keep up by of­fer­ing its stand- alone ser­vice for $ 4 less than HBO. Mean­while, CBS also of­fers its broad­band- only ser­vice — CBS All Ac­cess — for $ 5.99 a month.

The stream­ing in­dus­try is look­ing to f ind the kind of suc­cess that Netf lix has achieved. The com­pany’s pre­mium orig­i­nal shows as well as an ex­ten­sive li­brary of movies have at­tracted 40 mil­lion sub­scribers in the U. S. and are widely seen as a bench­mark.

“You’re go­ing to see more deals be­ing an­nounced,” said Mac­quarie Cap­i­tal an­a­lyst Amy Yong. “It’s only go­ing to ac­cel­er­ate more play­ers try­ing to part­ner with each other.”

David Bank, an an­a­lyst with RBC Cap­i­tal Mar­kets, said the Show­time- Hulu pact was a “pow­er­ful of­fer­ing ” for broad­band- only homes. But he said it still felt like “a so­lu­tion look­ing for a prob­lem” for ev­ery­one else.

“A deal like this doesn’t seem to be about eco­nom­ics or a bet­ter deal for a con­sumer’s pocket,” Bank said. “It’s more about the il­lu­sion of choice.”

In­deed, some an­a­lysts and pro­gram­mers say that some of the op­tions of­ten add up to about the same price of an ex­ist­ing ca­ble- TV sub­scrip­tion.

Talks be­tween Show­time and Hulu grew se­ri­ous at the end of last year. It was an un­ex­pected part­ner­ship con­sid­er­ing that Hulu is a con­sor­tium of three com­pet­ing media com­pa­nies: Walt Dis­ney Co., NBCUniver­sal and Ru­pert Mur­doch’s 21st Cen­tury Fox.

The du­ra­tion of the deal was not dis­closed, but Con­nolly de­scribed it as a chunk of time that would en­able “enough run­way to re­ally in­vest in the ser­vice and get cus­tomers com­fort­able with it, but also al­low­ing us some f lex­i­bil­ity.”

For Hulu, whose ba­sic sub­scrip­tion is priced at $ 7.99 a month, the deal keeps the f low of con­tent go­ing. Its of­fer­ings tend to be lighter in the sum­mer months be­cause the ser­vice re­lies heav­ily on pro­gram­ming from the ma­jor net­works. Show­time’s ros­ter of hits will beef up Hulu’s slate with­out the stream­ing ser­vice hav­ing to take on the risks of de­vel­op­ing its own orig­i­nal pro­gram­ming.

At the same time, Show­time ex­pands its dis­tri­bu­tion for the stand- alone ser­vice, which also has dis­tri­bu­tion deals with Ap­ple, Sony and Roku.

And con­sid­er­ing how many In­ter­net- con­nected de­vices — stream­ing boxes, game con­soles, con­nected TVs — are f lood­ing the mar­ket­place, the chal­lenge of hav­ing a broad de­vice foot­print is all the greater for an emerg­ing over- the- top player like Show­time.

“Con­sumers re­ally ex­pect you to be on all those de­vices, and it’s re­ally a hard thing to do,” Con­nolly said. yvonne. vil­lar­real @ latimes. com Times staff writer Meg James con­trib­uted to this re­port.

Craig Bar­ritt Getty I mages f or Hulu

HULU’S deal to part­ner with Show­time un­der­scores the Santa Mon­ica stream­ing ser­vice’s ag­gres­sive push to take on in­dus­try gi­ant Netf lix. Above, Hulu CEO Mike Hop­kins ap­pears in New York in April.

Suzanne Ten­ner Show­time

SHOW­TIME’S hit pro­gram “Ray Dono­van” will be among the shows that Hulu sub­scribers can ac­cess for an ex­tra $ 8.99 a month.

Ji m Fis­cus Show­time

THE PACT lets Show­time tap a wider au­di­ence as it launches its own stream­ing ser­vice in July. Above, Show­time’s “Home­land.”


SHOW­TIME’S hits, like “The Af­fair,” will beef up Hulu’s slate. For Hulu, whose ba­sic sub­scrip­tion is $ 7.99 a month, the deal keeps the f low of con­tent go­ing.

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