Could Disney's investment in Hulu upset the iTunes applecart?

Could Disney's investment in Hulu upset the iTunes applecart?

Summary: This week's announcement that Disney will invest in video streaming site Hulu sent shockwaves through the video industry and turned the spotlight on Hulu competitors YouTube and CBS. CBS and its fledgling TV.

SHARE:

This week's announcement that Disney will invest in video streaming site Hulu sent shockwaves through the video industry and turned the spotlight on Hulu competitors YouTube and CBS. CBS and its fledgling TV.com is the only remaining major TV network not part of the Hulu clique – NBC, Fox and now ABC.

The other major company that could feel some aftershocks from the Disney-Hulu deal is Apple. Business Week's Cliff Edwards points out that Apple neither creates video content nor does it distribute it for free online. Both of course, are core features of Hulu.

The threat is that Hulu is streaming free (albeit with ads) what Apple is trying to sell and rent. Gartner's Michael McGuire adds that we could be seeing a shift away from paying for video content to streaming it for free, saying "over time, perhaps the direct-payment model goes away."

Hulu's leading the movement to try to convince iTunes customers that they don't need to purchase downloads and that ad-supported video content is better because it's free. Business Week notes that Hulu may also charge subscription fees for premium services in the future.

Apple seems content to sit on the free video sidelines with video podcasts and their half-hearted Apple TV, but I wouldn't count Apple out just yet. It has too big of a lead in iPod and iTunes to simply let the networks run away with all the profit from online video.

What should Apple do?

I don't envision Apple trying to compete with free video streaming as it undermines the lucrative purchase/rental business model it built with iTunes. Should it roll out a video subscription service? Not likely.

What about a killer video streaming application for the iPhone? Apple currently has video viewing capabilities in the iPod app but it's reserved for video content that is purchased or rented from Apple. Software is available to convert video from other formats to play on the iPod/iPhone, but Apple frowns upon the practice.

While an iPhone video streaming app from Apple sounds like a good idea, BW reports that Hulu is secretly developing an iPhone app and may beat Apple to the punch? Will Apple approve it? Will Apple wake the sleeping AppleTV giant? Apple doesn't have much skin in the video streaming game currently and Hulu is trying to eat its lunch.

BW thinks Apple's "summer surprise" may come in the form of the rumored MediaPad from a partnership with Verizon, but will it be too little too late?

What would Steve do? Throw out some suggestions in the TalkBack.

Topics: Mobility, Apple, Banking, Browser, Software Development

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

25 comments
Log in or register to join the discussion
  • Ironic considering that Jobs

    is Disney's largest shareholder.

    I wonder how he missed this one getting by... ;)
    GuidingLight
  • What about the rest of the world

    Yes, Disney is investing in Hulu and attempting to
    undermine Apple's iTunes. One thing you forget. iTunes is
    available to everyone in the world with a computer and a
    few dollars. On the other hand Hulu is only available to be
    viewed in the US. The majority of the world's population
    does not live in the US, nor does the majority of people
    with access to computers. Everyone, not just Americans
    like watching stuff on their computers. I will continue to
    use iTunes and support Apple and I am sure the majority
    of people who does not live in the US will continue to
    support iTunes, along with many Americans.
    Zakaby
  • RE: Could Disney's investment in Hulu upset the iTunes applecart?

    Steve Is Disney's biggest shareholder What are u an idiot?
    smrtsmrt
  • RE: Could Disney's investment in Hulu upset the iTunes applecart?

    <blockquote>iTunes is
    available to everyone in the world with a computer and a
    few dollars.</blockquote>

    The store may be, but not the content. iTunes can't sell everything, everywhere. There are still restrictions on what iTunes can sell and where...
    Ambivi
  • RE: Could Disney's investment in Hulu upset the iTunes applecart?

    Like who cares about greedy apple anyway? I sure don't. When it comes to content, they have been nothing but a bunch of control freaks from the start anyway. I understand making a buck, but they are beyond the call of duty. They wouldn't care if people had to buy their library twice and they always make it difficult to back up or move your songs. And they don't care if you already bought it before... nope. Plus they "frown" upon anything that helps the customer, unless it lines their pockets. And their ads only try to stab their competitors in the back with lies.

    I say, let them suffer. I will laugh quite a bit.
    jzone
    • You care

      Or you wouldn't bother. Like it or not Apple is a market shaping force in
      the world.
      use_what_works_4_U
  • ...trying to upset the APPLE cart for a story...again...

    Really? How many stories have I read today on both tech
    sites and non tech sites about how this is going to be bad
    for Apple? FanBoy-or-not aside, this is like comparing
    APPLES to ORANGES (yes, pun intended). iTunes is for
    OFFLINE content viewing, while Hulu is for ONLINE viewing.
    SHEESH!! Seriously, if the writers of these articles can't
    figure this out by now, they need to stop typing on their
    IBM Selectrics, stop licking stamps, and figure out how to
    use their Compuserve accounts correctly. Now, I really like
    Hulu. The problem with Hulu is their rather anemic
    selection of video. The quality is fairly good, though most
    of the world seems to think that "YouTube" is and should
    be the defacto standard for "good" quality internet video
    (HQ). OOMPFFF. And, the commercials are relatively
    benign. This deal will go a long way to help. But, I am
    relegated to sitting in front of my computer at a relatively
    uncomfortable desk, and viewing content. Or, I am stuck
    sitting somewhere with my neck bent at a less-than-
    optimal position (says my chiro) to watch streaming video
    (highly compressed...most of it) on my small (by today's
    standards...not itty-bitty-netbook) 17" laptop screen.
    With iTunes (as you all well know...), I have the ability to
    download content to my computer, dump it on my ipod,
    carry it around with me and view it when and where I want
    (bus, bathroom, bar, barn...etc.). I can then also hook it up
    to practically ANY TV or screen that has an A/V hookup
    and watch it (albeit also somewhat compressed) on a
    larger screen if needed. Or even hook it up to my cars
    DVD player and allow my kids to watch all those wonderful
    Disney movies in digital format that are stored on my iPod.
    Umm...yeah...Hulu...gotta have a network
    connection...gotta stream it. Ok, so you could argue Apple
    TV, Roku, even HTPC. Sure...but that's a whole nother
    ZDNET article right there. You could also argue that to use
    iTunes you need a network connection...right you are
    there...Regardless, I still prefer physical media. Better
    picture, better sound. Anyone tried watching an episode
    of LOST on their ipod? I have! Streaming or not, while it is
    a quaint exercise which truly tests the limits of your vision,
    it is an experience that needs to go the way of Oceanic
    Airlines flight 815. Peanuts anyone?
    bongoo
    • Did you read the stoy until the end? nt

      nt
      Dealing
    • Respectfully Submitted

      More paragraphs and less vitriol? I thank you for your consideration.
      DannyO_0x98
      • Respect

        Danny, you responded well and civilly. Ad hominem attacks should have
        no place in this venue. I thought your article well stated. Good work.
        Ignore the riff raff.
        dheady
  • RE: Could Disney's investment in Hulu upset the iTunes applecart?

    Hulu absolutely SUCKS when it come to movie content. There's no upset on the movie side, TV yes, but movies have a long way to go on Hulu. Hulu is almost entirely porn for it's movie selection and I am surprised to see Disney jump on board.
    HULUsucks
  • RE: Could Disney's investment in Hulu upset the iTunes applecart?

    What content that Disney creates is something you just
    have to have? Several tears ago Disney talked the cable
    industry into carrying them as a Premium channel. That
    bombed out. Now they are part of cable's basic package
    and run like commercial TV. Mainly what you see is reruns
    of Lilo and Stitch, Hanna Whatshername and High School
    Musical. There are a smattering of odd cartoons that are
    looped continuously.

    All in all it amounts to the usual poor fare from Disney.
    Disney has been looking for a carrie for their shows for
    some time now. Hulu will give Disney possibly more
    exposure but not the revenue stream they hope for.

    You Tube and Apple have nothing to worry about.
    Creators with great content will demand a premium for
    their shows. Apple has the profit model down pat and You
    Tube will continue to be s Pirate site.

    I have Hulu and Joost accounts. Joost is totally
    unorganized. Do a search on a film and you get pages of
    listings in every language, dubbed, sub-titled and so forth.
    Hulu's commercial suck big time. Needless to say I do visit
    either regularly. I go to Google TV, You Tube or Netflix.
    This is much ado about nothing.
    vince71
    • Say it with me . . . .

      <b>ABC</b>

      Think LOST, All the ABC Soaps( currently #1 or 2: Trust me - this one ALONE will be a big revenue stream). How 'bout the old Monday night Football reruns? Or Sports games replays after a certain length of time?


      There's a TON of old ABC shows (SOAP, HAPPY DAYS, ROSEANNE, DESPERATE HOUSEWIVES) that could be available for streaming.

      Needless to say, I think they will make money on this . . .
      JLHenry
  • RE: Could Disney's investment in Hulu upset the iTunes applecart?

    Well considering that buying songs from iTunes is a losing proposition, since in a few years that collection of songs you bought through the years will be rendered useless, and the fact that people STILL buy them from Apple in spite of it.
    Well I have to figure that Apple may still be able to "sell" the masses on any semi-worthless idea they come up with.

    As for which way to go, just take a look at South Korea's system, they are years ahead of our technology. They already have had streaming video.
    Zemo
  • RE: Could Disney's investment in Hulu upset the iTunes applecart?

    Anytime there are ads involved the
    public is turned off. I often wonder
    about the true affect of commercials.
    Many times they do exactly the
    opposite and convince me never to
    buy that product. They are so invasive,
    louder volumes, the worst timing, ect.
    I think most people would pay to
    avoid that. I would. At any rate Apple
    has managed to keep some integrity,
    although not all in the "Age of
    Thievery and Deceit.:
    capealava
  • Hulu is good for me,

    there are a number of network tv shows that come on while i'm at work. with hulu i still get to watch these shows. maybe a day late, but still. i also get some cable shows that i like even tho i don't have cable. i had to get used to the 15 or 30 second commercial break. i use the breaks to get a drink, snack or what ever. keep having to rewind the video to see what i missed. usually wind up having to watch that one commercial anyway. i like hulu, i tell everyone about hulu.

    as for apple and itunes, two completely different markets. kind of like asking will ubuntu 9.04 kill mac sales. not likely.
    brokndodge9
  • A major shift is underway....

    Away from physical media for movie distribution. Moving towards network distribution and local computer storage of movies. Who will win? It's way too early to tell. ITunes favors folks who want to own their movies and have the local capability to properly store and archive their collections. Streaming favors those who don't care to own and have strong bandwidth but the cable providers are starting to kick back with monthly usage limits. VOD for others. There may be no one winner as the system will evolve into multiple avenues of distribution to serve multiple tastes.

    IMHO Disney is making a smart move, get a horse in as many races as it can to maximize profits. I don't see it so much a threat to iTunes as I see it as, yet another, big threat to the old physical distribution system (aka Blockbuster, Best Buy and the like).
    oncall
    • Not to Mention . . .

      the Cable and Satellite TV companies . . .
      JLHenry
  • RE: Could Disney's investment in Hulu upset the iTunes applecart?

    I think the recent dust-up about Boxee implies strongly
    that studios/networks will play games with the channel in
    order to protect broadcast television. This strongly implies
    that the revenue upside for ad-supported on-demand
    streams isn't there yet. Some money is being made, so
    Disney has joined in.

    iTMS competes with Amazon, Wal-Mart, Netflix,
    Blockbuster, etc., but its primary mission is to distribute,
    profitably, content for the devices Apple makes.

    Bottom line, I'm not seeing the connection as to how
    Disney buying into Hulu hurts iTMS. As to streams, the key
    is the allowed devices, and Disney, being a sort of cousin
    to Apple via Pixar, will provide a voice that will say it
    makes no sense to exclude millions of Mac, iPhone, or iPod
    users while favoring other devices especially as costs per
    thousand viewers will be the key formula for revenues.

    I remind everyone that Universal, with strong long-
    standing relationships with Microsoft and antagonisms
    towards Apple, might argue for a Microsoft subsidized and
    exclusive distribution channel which would generate
    greater revenues in the short-term. In the long-term, the
    theory goes, the Apple install base withers and disappears
    without the content, so there's no downside to excluding
    Apple now. Fox tends to be neutral and okay with
    whatever and whereever money can be made.
    DannyO_0x98
  • as always completely wrong

    man jason, you are so off the mark it is already comical: the
    "lucrative purchase/rental business model"? you now that
    selling/renting is just a loss leader for apple to sell hardware? there
    is no lucrative business for apple in renting/selling video. they
    clearly stated that nth times at their conference calls.

    and how is having free hulu content any different from having free
    youtube content on the iphone/ipod or the apple tv? apple couldn't
    care less where the content comes from they only want to make
    sure that their hardware can access all the content. that's all they
    care about.

    how is it possible that someone is writing about apple that doesn't
    even know their basic business principles? oh wait it's cnet, here all
    the bloggers write about stuff they don't know anything about.
    bannedfromzdnetagain