Talking tech since 2003

Just yesterday I discussed the recently released Roku 2, the second generation of the somewhat popular streaming media device.  When going over the third-party services that the device utilized, I even went as far as to say that I myself have been “pondering dumping my satellite provider in favor for the Roku XS along with a Hulu Plus (and maybe Netflix) subscription.”  With web-based television becoming a more flexible and cost-effective entertainment solution in retrospect to traditional cable and satellite providers – especially for users who only consume mild amounts of television – I know that there are tons of other people making the same consideration that I’m making.  Now, I’m personally a big fan of Netflix for movies, but I’ll be the first to admit that Netflix’s streaming media has significantly fewer television series than Hulu Plus.  That said, I can easily see where Hulu has room to grow in the coming years as more and more consumers entertain the idea of alternate entertainment solutions.

According to Bloomberg Businessweek, who is in turn citing “two people with knowledge of the auction”, Apple is in talks that could very well lead to the company acquiring the popular online television streaming service.  Such a move would be the company’s first acquisition of this year, and in comparison to the other buyouts made by the company would definitely be the most notable.  But would Apple’s purchasing Hulu lead the company in the right direction?

I think so.  Apple has, after all, been moving more and more towards subscription based services in the last couple of years.  Look at the iTunes Match service ($25 per year) that was announced at WWDC.  Then look at the company’s implementation of magazine subscriptions, something that we’ve seen pushed more on the iPad, and Apple is quite obviously showing that they’re not afraid of subscription services.  After all, by getting users to buy into subscriptions gives the company a revolving cash-flow that is independent of the revenue they earn from devices and one-off software purchases.  Pair this with the fact that people tend to like “all you can eat” subscriptions like Hulu instead of pre-episode purchases through services like the iTunes store, and Apple really is in a position where subscription-based television offerings are becoming a necessity.

But why not start their own service?  Surely it would be cheaper for the company to go out and build their own service than it would be for them to buy Hulu, right?  As much as that may be true, we have to consider that Hulu has existing relationships with television networks and content producers.  So the reality is, Apple wouldn’t only be buying the established company, but would save themselves a lot of leg-work in negotiating contracts themselves.  That said, though, I honestly don’t understand why Apple couldn’t build upon their own relationships with the same networks and producers in order to make subscription-based services doable.

Moreover, like I said earlier, Apple’s buying Hulu would be their most notable acquisition to date.  Sure, Apple has spent a pretty penny in sweeping up various other companies in the past, but none of them have been in the public eye to the extent that Hulu has.  Back in August Jeff had discussed the possibility of Apple buying Skype to build upon and improve the then recently announced FaceTime service.  As ideal as I thought this sounded at the time, when pondering the same issue more recently I have personally wondered if Apple would even consider such a buyout.  You see, the one thing I’ve always noticed about buyouts is that they’re never quite “seamless.”  Often times users don’t see a noticeable difference in the service for some time after the buyout goes through.

Going back to the issue at hand, Apple’s buying out Hulu would surely take a significant amount of effort in terms of migrating the backend over to Apple’s services.  Think of all of the accounts that would have to be merged and how the service would have to be tied into the iTunes store.  With all the effort that would have to be put forth to do that, why wouldn’t Apple just start from the ground up?  I mean, they’d more or less have to do the same thing if they bought Hulu anyway.

All that said, Apple is one of the most resourceful companies in the world.  They could easily build their own subscription based television service, and I would be somewhat disappointed if they copped out to simply buying Hulu.

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