Time Warner Bets Heavily on Hulu

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Time Warner on Wednesday announced it has entered an agreement to buy a 10 percent stake in online-streaming service Hulu, in a bid to leverage its lineup of television and film content on multiple viewing platforms.

With the new investment, Time Warner will join a joint venture that includes some of the nation's largest media companies, including The Walt Disney Co., 21st Century Fox and Comcast.

Time Warner will provide Hulu's new live streaming service, set to launch in early 2017, with live and on-demand content from its powerful Turner brand of cable television networks, including TNT, TBS, CNN, Cartoon Network, Adult Swim, truTV, Boomerang and Turner Classic Movies.

The upcoming Hulu service will offer instant access to live and on-demand entertainment on mobile and living room devices.

The investment is part of Time Warner's strategy to make sure that its brands can reach viewers on a range of platforms and devices, and in bundles using traditional and new ecosystems, Time Warner CEO Jeffrey Bewkes said in a Wednesday conference call.

"This investment fits our strategy like a glove," he told analysts. "It will increase our company's exposure to the secular growth in over-the-top services, and will give Hulu more resources to offer consumers more shows and more choices, fostering competition and innovation amongst both SVOD services and among MVPD services."

The investment in Hulu leaves Time Warner free to fully support other traditional and broadband-delivered distribution platforms, which the company plans to do, Bewkes added.

The investment marks a major step for Hulu as it continues to "redefine television both for consumers and advertisers," said Hulu President Mike Hopkins.

Hulu and Time Warner have a longstanding existing relationship, he noted, as past seasons of Time Warner's shows have been available on Hulu's SVOD service.

The streaming service is expected to launch by the first quarter of 2017. Hulu is researching how to price it, but it likely will fall in the $40 to $50 per month range, according to a person familiar with the company's plans.

Time Warner is preparing itself for the future, when traditional cable operators no longer will be the main drivers of content to the mass consumer audience, suggested Dan Cryan, senior director of media and content at IHS Markit.

"Fundamentally the pay-TV landscape in the U.S. is undergoing a significant period of change," he told the E-Commerce Times.

Streaming services like PlayStation Vue, Sling TV, expanded mobile offerings from DirectTV, Amazon Video and other services are making the availability of broadband video more competitive than ever, Cryan said, and companies like Time Warner have to have their content available on these new platforms.

"Buying into that gives Time Warner a meaningful stake into one of the early leaders of that space," he observed.

Older industries have to adapt to new technologies and viewing preferences, said industry analyst Jeff Kagan.

"TV is going through enormous growth and change, and Time Warner wants to make sure they are on the growth side of the wave," he told the E-Commerce Times. "If not, they would begin to lose business going forward, and that is not something they want."

Time Warner executives are taking this step to preserve the integrity of the company's existing content catalog, suggested Tim Mulligan, senior analyst at Midia Research.

"Jeff Bewkes has made no secret of his concern about OTT services encouraging cord cutting through providing full access to current TV seasons," he told the E-Commerce Times.

"This stake in Hulu will empower Time Warner to further resist demands to open up the back catalogs to video on-demand services, and restrict full content season access for Time Warner content to Hulu's planned 2017 premium cable-like online streaming service," Mulligan said.

In addition to trying to attract millennial cord cutters, Time Warner could be gravitating toward Hulu in order to find a partner that can get that content into traditional living rooms.

"Time Warner knows that the future of content delivery is in the over-the-top space, and Hulu knows that in order to be successful in the OTT space, it will need lots of new, fresh content, as well as substantial capitalization," said Michael Jude, a program manager at Stratecast/Frost & Sullivan.

"This investment helps position both parties for success," he told the E-Commerce Times.

Including news and sports, like CNN and the Turner stations, will make Hulu's offering more competitive, Jude added.

"With operators like AT&T and Comcast gettting into the streaming subscription business, this helps maintain Hulu as a viable option for subscribers," he noted.

It's very likely that we are going to see more traditional cable companies invest in streaming content services like Hulu and Netflix to bring content to younger cord cutters on a mass scale, according to Jude.

"Everyone is getting into the OTT space," he said. "They have to, because subscriber preferences are changing."

Consumer preferences are trending toward broadband-delivered services, Jude said, citing Frost research.

Although content is king, almost equally important to consumers is being able to access it anywhere and on any device, he suggested. "Mobile will be an important part of the equation."

David Jones is a freelance writer based in Essex County, New Jersey. He has written for Reuters, Bloomberg, Crain's New York Business and The New York Times.

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