What's going on?
Time Warner, the media giant that owns HBO, CNN and Warner Bros., reported its earnings on Wednesday. The take-away? While Time Warner’s revenue and profits were down, the company has agreed to buy a 10% stake in Hulu, the popular streaming service, for $583 million. Its stock was up 2.7%.
What does this mean?
Today Hulu is a lot like Netflix, with TV shows and movies available to stream to its 12 million subscribers (Netflix has 83 million). But the company is building a live TV version that will reportedly include popular channels from its partners like USA Network, ABC, FX, (and now) TBS, Cartoon Network and CNN. The new service is rumored to cost between $35 to $50 per month, putting it above the price of streaming, but below most cable packages.
Why should I care?
For the stock: It’s a defensive move by Time Warner.
Consumers are shifting away from cable and “cutting the cord” is now officially a thing – it’s estimated that, by 2019, 23% of US households will no longer pay for traditional TV. So, although it won’t own as big of a stake in Hulu as Disney, Fox or Comcast, Time Warner is hoping that Hulu comes out on top versus competitors like Netflix, Apple and Amazon in getting those households’ attention (and wallets!). Apart from its ownership stake, Time Warner will also benefit from a new distribution avenue for its content.
For you personally: The future of TV may look a lot like… cable.
With exclusive content and partial ownership by the major networks, “streaming” may not be the utopia that cord-cutters are hoping for. Based on where things are going, there’s a chance you’ll be paying a monthly subscription for Netflix to watch House Of Cards, Hulu to watch CNN, MLB TV to watch baseball, HBO Now to watch Game Of Thrones, Amazon Prime to watch… you see where this is going.