In November of last year, reports surfaced regarding discussions for media streaming service Hulu to sell a stake to Time Warner.
Hulu is currently owned by 21st Century Fox, Comcast and Walt Disney, with each entitled to a third. Reports are stating that the stakes of the companies will be sold to reduce their holdings to 25 percent each, with Time Warner snatching up the remaining 25 percent.
The deal would boost the value Hulu at more than $5 billion and would advance the media streaming service's efforts in competing with rivals such a Netflix and Amazon.
The stake sale discussions, however, reveal the tension for the media companies that own Hulu. Specifically, placing their best content into the service will allow it to better compete with rivals, but could also lure even more subscribers to become cord-cutters and move away from pay TV.
"If everybody in the industry is worried about Netflix driving cord-cutting, shouldn't they be just as worried about Hulu?" asked Anthony DiClemente, an analyst at Nomura Securities.
Time Warner's Question
Time Warner has been under pressure to show to its investors that it has a plan to continue thriving in an entertainment industry where streaming content is rapidly on the rise.
A possible investment in Hulu could be part of that plan, but Time Warner has been asking the loaded question of how much longer cord-cutters should wait before they can watch the current episodes of TV programs on the streaming service.
Hulu contains current-season episodes for shows such as "Empire" of Fox and "Quantico" of ABC. This allows subscribers to catch up on TV programs as the season goes along, which is a key differentiator to Netflix and Amazon as these companies only allow subscribers to view episodes after the end of a season.
Time Warner, however, believes that having full and current seasons of TV program on Hulu, or in any other online location, is harmful to the stakeholders of the programs because it leads to users dropping their subscriptions to pay TV, which is the practice termed as "cutting the cord."
Hulu's Plans
The current owners of Hulu do not have plans to remove the ongoing seasons of the TV programs, according to sources familiar with the matter. However, over the long term, the matter remains open for discussion.
21st Century Fox, Comcast and Walt Disney have been delaying the finalization of agreements about shows' present seasons to Hulu as the issue is still under discussion. Under a two-year licensing deal, which expired in 2015, the owners were required to provide Hulu with the complete current seasons of all shows produced by in-house studios, which air on networks such as ABC, Fox and NBC, with very limited exceptions. The agreement has been receiving short-term extensions during the interim as discussions drag out.
In the meantime, Hulu has been decreasing its reliance on current season TV shows, as it struck deals to feature old shows such as "Seinfeld" and "Casual."
The Future Of Time Warner And Hulu
Time Warner does not want to put the entire current season of TV shows from its networks, including TNT and TBS, on Hulu. However, the company understands the difficulty in changing the stance of Hulu's owners regarding the matter overnight.
If the stake acquisition pushes through, Time Warner will be looking to reshape the online streaming video market to instead support pay TV, particularly sending users to video-on-demand service and apps that are tied up with subscriptions to pay TV.
One alternative to the approach currently employed by Hulu is to hide the current seasons of TV programs behind paywalls, which will only be accessible to subscribers of pay TV - similar to what Hulu does for certain shows such as USA's "Suits".
What the future holds for Time Warner and Hulu, and for pay TV and streaming video services in general, however, will largely depend on how consumers react to the decisions that these companies will make from here on out.
