Analyst: Hulu Should Charge Broadband Providers26 May, 2009 By: Erik Gruenwedel
The much ballyhooed proliferation of repurposed content on Hulu.com, TV.com and other sites is getting increased scrutiny as some begin to question the financial wisdom of media companies offering unlimited free content online.
With continued declining advertising revenue due to the recession, analysts say network brands such as CBS, ABC, ESPN, NBC and Fox would be wise to develop dual revenue streams for their repurposed content online.
Richard Greenfield, analyst with Pali Capital, lauded Comcast’s recent decision to pay a monthly fee that allows its 15 million broadband subscribers access to ESPN360.com.
“Paying for ESPN on TV should not simply mean you get ESPN in all forms on all platforms at no extra cost,” Greenfield said in a note.
Specifically, the analyst is worried about “all-you-can eat” smorgasbord plans earmarked by major cable operators Comcast and Time Warner that afford subscribers the opportunity to watch the same content online through an easy-to-use, authenticated gateway controlled by broadband providers at no extra cost.
Pali estimates that about 95 million consumers in the United States now subscribe to multichannel video providers (cable, satellite), paying around $65 per month of which about 38% or $25 per month is paid back to content owners ($28 billion in total annual license fees).
Greenfield said that applying the same percentage (38%) to the 55 million consumers that pay about $42 per month for high-speed broadband Internet access, content holders could realize another $10.5 billion in annual incremental revenue.
The analyst said video remains the key driver toward wider broadband adoption, and as a result, operators should pay content providers to help grow the platform. He said Hulu’s recent acquisition of repurposed ABC content, in addition to content from NBC and Fox, portends greater leverage toward broadband providers.
“We believe the time is right for Hulu to seek a fee from [them],” Greenfield said.