Disney and Hulu announced a new partnership and content distribution deal, under which The Walt Disney Company will join News Corp and NBC Universal as an equity partner in Hulu, an ad-supported online content distributor. The deal means content from ABC, ABC Family, Disney Channel, and SOAPnet, as well as some classic ABC TV content now will be made available on Hulu.
Hulu also has overtaken Yahoo! and become the third-most-used Internet video site, even as Time Warner plans a test later this year of its own distributor-friendly online distribution. As envisioned, the "TV Everywhere" plan will make online content available to paid subscribers to a qualifying cable, satellite or telco linear programming package.
With Apple, YouTube, NetFlix and others looking to grow their streaming operations, distributors might welcome the Time Warner approach, even though Hulu has undeniable traction at the moment.
And therein lies the distributor's problem. If Hulu is able to keep growing, with an obvious ad support mechanism, it necessarily will devalue linear video subscriptions. That isn't to say Hulu will completely replace linear TV offerings, simply that it becomes incrementally more attractive for at least some users.
But content companies aren't dumb. They know with great precision how much value they derive from their distributor partners. That doesn't mean they will ignore new "direct to end user" venues that essentially disintermediate the middle man. But they aren't going to disrupt profitable arrangements with distributors, either.
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