Another Cable Giant Jumps Ship with Time Warner’s Investment in Hulu

We would never have guessed in Netflix’s DVD days that it would lead to the cord-cutting war.

Yesterday another cable giant invested in internet TV when Time Warner Inc. agreed to buy a 10% stake in OTT video service Hulu for $583 million. Time Warner sees the move as a strategic investment to help Hulu’s innovation and resources as they plan to launch their upcoming live TV service in 2017. The cable network is only interested in their live TV program which will rival Sling TV’s format (which Time Warner also has licensing deals with), giving Hulu's audience access to channels like TNT, TBS, CNN, Cartoon Network and Turner Classic Movies.

Sling TV, Netflix, and Amazon Prime are all reputable video on demand platforms but Hulu now reaches a valuation of $5.8 billion along with an investment board of television’s elite: Comcast, 21st Century Fox, Walt Disney, and now Time Warner.

Time Warner’s safety net with their heavy agenda in video streaming services is a little quieter than Instagram’s robbery of Snapchat.

Nonetheless, Hulu’s recent investment says a great deal about the audience battle between cable and the cord cutters.

With the growing competition of internet TV services as well as television partnerships beginning to merge with social media platforms, media is beginning to deliver more content directly to consumers. As Web TV services look to build upon the new age audiences, they create a bigger market for their parent companies and investors. Does this mean digital video is the end game?

The landscape of internet television

The share of paid VOD users in North America (35%) surpassed that of cable TV customers (31%). According to a June 2016 forecast from Digital TV Research, there were already 81.8 million subscribers to VOD services in the U.S. by the end of 2015 (excluding sports).

The future of web TV services means the expansion of cable to digital. The digital media landscape is evolving to consistently cut out the middle man, from music to television. Overall, the concept that appeals most to consumers is that they only pay for what they’re interesting in watching. From a macro perspective, OTT platforms have grasped a younger demographic, mostly because of how viewers can select the content they want to pay for with little commitment as plans usually operate on a month-to-month basis.

It’s highly unlikely that the same viewer will pay for cable TV and pay for Hulu’s service simultaneously. It’s also unlikely that a user will pay for multiple web TV streaming services, so a mass overlap of consumers isn’t expected.

The luxury that these services offer is that there are several upgrades in the realm of sports packages, premium channels, and other bundles. Let’s not forget that the customization on the consumer side audiences begin to classify themselves by the content they like to watch. Since this is done digitally, businesses will have access to their viewer demographics, enabling advertisers to target much more efficiently; which is apparent through YouTube’s domination.

Where’s digital media headed?

Time Warner Chief Executive Jeff Bewkes said on an earnings call with analysts that the investment will “increase our company’s exposure to the secular growth in over-the-top.”

As media companies and cable providers start to create a digital footprint for the viewers who have cut the cord, it shows that brands see a need to connect to audiences in their habitat.

Although, the battle of internet streaming is a complicated one as social media platforms have begun to join the market as well.

Facebook has been active with live streaming and this past summer they secured the live-streaming of nine exhibition games leading to the Summer Olympic Games  for the U.S men’s and women’s basketball teams.

Twitter has just secured a partnership with the NFL as their exclusive OTT partner to deliver a live digital stream of 10 Thursday Night Football games during the 2016 NFL Regular Season. The partnership created a three-way distribution model for the NFL as they will be broadcasting their games with NBC or CBS, through cable on NFL Network, and now through digital.

Hulu’s live TV service will be in direct competition with television networks but the backing from TV’s major providers is further validation of the value of internet video. With social media evolving to become a distribution channel for streaming television, digital video platforms are only growing in competition. Time Warner’s investment in Hulu is bigger than simply raising their valuation, it means an endorsement of the video streaming revolution to come.

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