I had to laugh over the weekend when The Wall Street Journal reported that Hulu intends to create and air more original programming:
Online video site Hulu LLC is increasing its output of original shows, the latest in an escalation of TV-like programs being made directly for the Internet, further blurring the lines between the Web and TV.
It seems everybody thinks they can do original programming these days. Of course, Netflix (NFLX) must go that route to have any chance whatsoever at survival. Google (GOOG), meantime, has the luxury to tinker as it slowly shares world domination with Apple (AAPL) and Amazon.com (AMZN). If I'm Time Warner's (TWX) HBO, I'm not sure if I should be flattered or offended.
As I've articulated in previous articles, Netflix, or Google and Hulu for that matter, couldn't hold HBO's athletic supporter. While I admire the aforementioned three's pluck, people often confound the false notion that they can trump the programming on television with the very real possibility that they will help render the boob tube, as a means of content delivery, obsolete.
Reed Hastings riffing about Netflix and HBO in the same breath, however, is akin to Sidney Crosby, speaking in the first person, and comparing himself to Wayne Gretzky. Of course, the latter never happened because Crosby does not suffer from delusion.
I'm not exactly sure why the old guard media, led by Hulu co-owners Disney (DIS), News Corp. (NWSA) and Comcast's (CMCSA) NBC Universal, do not step in, once and for all, and punk-slap Netflix straight. Instead, they're doing it in, albeit powerful, fits and starts.
HBO GO and the recent Disney-Comcast hookup represent some of TV Everywhere's best efforts. Until he made the inane HBO is our only competition comment, Hastings considered TV Everywhere Netflix's greatest threat. (In this April shareholder letter, Hastings cites TV Everywhere and notes that Netflix still must "prove" its worth to HBO and Showtime). While these ventures are certainly not disparate, they lack coherent connections between one another. They'll continue to box out middlemen like Netflix, but simply delay the death spiral.
There's no doubt that many content creators allow Netflix to exist so they can fleece them on licensing fees for programming no longer worthy of advertising dollars. In this regard, they take a short-sighted view. The long-term health of the studios, programmers and cable and satellite operators depends on a multi-platform, but unified distribution system.
Television's old guard should take a cue from Clear Channel's (OTCQB:CCMO) decision to put as much "competing" content (from entities ranging from public radio to Cumulus Media (CMLS) to the privately-held Greater Media) on its web and mobile app, iHeart Radio, as it can. Not only does Clear Channel's move blur the lines between the web and radio, it, maybe more importantly, changes the dynamics of the competitive landscape. The company clearly realizes that it no longer competes, merely, in radio or in the car, but across a wide-ranging universe that includes much more than traditional radio stations. As such, it incorporates historically competitive content into its new media application, while ensuring that it shows up practically anywhere a listener might be:
The company's radio stations and content can be heard on AM/FM stations, HD digital radio channels, Sirius/XM satellite, on the Internet at iHeartRadio.com and on the company's radio station websites, on the iHeartRadio mobile application on iPads and smart phones, and used via navigation systems from TomTom, Garmin and others.
Nothing short of a brilliant move by Clear Channel's new CEO Robert Pittman. Of course, Internet radio outlets such as Pandora (P) and satellite radio provider Sirius XM (SIRI) should take note and find creative ways to do likewise. But, the self-reflection should not stop there. Every old (and some new) guard company in the video entertainment sphere should pay attention and mimic this type of concerted effort.
The reasons why, at the very least, Disney, News Corp. and Comcast have not thrown everything they have - programming and resources - into Hulu escape me. At day's end, Hulu's owners should be calling every content creator and deliverer under the sun - like Clear Channel did with WNYC in New York, Cumulus, Greater Media, etc. - and striking deals to make Hulu the one-stop shop for web streaming of all programs, old and new. Make Hulu the cable of the Internet using, for all intents and purposes, the traditional model of tiered pricing, but with plenty of a la carte and on-demand options available.
Under this scenario, studios and programmers could still sell non-exclusive to Netflix and Amazon if they're dumb enough to keep buying it. With TV Everywhere situated all in one place, it will become clear to the consumer that there's no need for glorified bootleggers like Netflix to exist.
Additional disclosure: I am long NFLX June $40 put options. I intend to initiate long positions in CMLS and TWX this month.