What's Cable's Future in 5 Years?

29 October, 2020

by Shabnam Morim

Top-line Summary:

  • The future of cable needs to appeal to both cord-nevers and cable-lovers.
  • Hulu facilitates this by embracing the value of leveraging linear and digital content, distribution channels, and business models. How?
    • Packaged Over Fresh: Hulu prioritizes aggregating licensed content, with few high quality originals.
    • Digital Window to Linear: It serves as a second or third window to linear content, extending its reach and popularity.
    • Flexibility & Stability: Hulu offers competitive prices and user flexibility via a ‘build-your-own’ streaming platform model that includes cable staples such as LIVE TV and ads.
  • Yet, Hulu’s revived and symbiotic cable model may lose steam if competitors stop using the platform as a second/third window and as an exclusive digital platform.

Are Streaming Aggregators the New Cable?

Throughout the 2010s, we’ve seen SVODs and AVODs become competition cable could no longer ignore as people have been cutting the cord and switching over to VOD. Meanwhile, younger generations have never even experienced the cord to begin with. As we’ve entered 2020, the streaming wars have come into full swing cementing that the future of TV is at least in part digital.

The growing streaming options not only increase the pressure on consumers’ wallets but also the competition amongst producers and distributors. Consumers fear switching from expensive cable TV subscriptions to expensive digital subscriptions. Although individual streaming sites are more affordable than cable packages, most households report having budgeted enough to have 2-3 subscriptions at a time.


So what does this mean for the future of cable? Is cable doomed to becoming obsolete?

I contend the future is leaning away from either-or — aka linear or digital —, but moving towards a yes-and — linear and digital. I expect we will see more partnerships that bridge the linear and digital worlds. In fact, we already have.

Hulu has been demonstrating the feasibility and profitability of appealing to both cord-always and cord-never generations by incorporating key components of cable into its VOD service.

Digitizing Channel Surfing

Netflix proved that audiences wanted thrilling content previously unavailable on cable. While Hulu embraces this fact, its approach reveals audiences value some traditional aspects of TV as well.

Mindless TV Watching: Seeking Comfort not Novelty

Hulu has the nostalgia of beloved favorites with enough original content to make their platform feel fresh for audiences. People may not associate Hulu with lots of exciting fresh content, but nonetheless Hulu has built their brand around having a vast and varied library.

While its originals generate less than 1/5th of the total demand of Netflix originals, it has a more in-demand catalog and has the most in-demand licensed content, which draws audiences to subscribe and stay engaged.

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While a large catalog is a popular early platform approach, Hulu’s focus on a larger licensed catalog embraces that people channel surf as a solution to not knowing what they want. Channel surfing’s mindlessness provides audiences the feeling of relaxation and the unwinding they desire from TV without committing to a show. Their prioritization of licensed catalog based off of pre-existing brands of creators encourages mindless engagement as a tool for audience retention.

Digital Channels: Netflix vs. Hulu

Last year, Netflix launched more original programming than the entire cable TV industry had a decade earlier. Netflix’s high output strategy has established it as a reliable platform for fresh content, encouraging audiences to build the habit of turning to Netflix for new releases.

Hulu has focused on making fewer higher quality originals, which have come to compete with Netflix. The platform has enough quality originals to draw subscribers, but its true appeal is its catalog not its originals.

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US Netflix’s established brand of “premium” original content for all taste clusters has made it a leader. Yet, I suspect the expectations audiences experience can also create backlash. Despite their large catalog and exorbitant releases of originals, my friends have openly admitted, “There’s nothing for me to watch on Netflix,” or, “I finished Netflix.” This perception may only exist because of the expectation.

Netflix and Hulu are aware of the simple fact that audiences are not constantly looking to watch quality TV, but take different approaches.

Netflix executes this by creating hyper-targeted originals that may be lower quality or mindless (i.e., reality, comedy specials), but entice audiences with novelty. This is likely an outcome of Netflix’s binge-release strategy. Yet, there are unintended consequences. First, audiences experience Netflix as a singular channel. Second, Netflix trains its audiences to expect novelty, but novelty can be exhausting.


Hulu, on the other hand, is an aggregator that is experienced as multiple channels. If you do not know what mood you’re in, you can flip through “channels” by switching between shows branded by various cable channels as well as on LIVE TV or special channel add-ons (e.g. EPIX, HBO, Starz) until you find the right fit.

Thus, Hulu’s approach is much like a large cloud DVR they spend less of their catalog investing in originals that are high-quality, and entices audiences with the aggregation of brands and the comfort of many “good enough” licensed options. Thus, as an aggregator, it brings cable content into the digital future and model of TV. And it does so in multiple other ways…

Hello From the Linear Side: A Digital Window

Moreover, Hulu has monetized the valuable component of “niche” cable content by serving as a second window, recognizing that for cord-nevers this content might be mainstream.

Examining Hulu’s tentpoles top titles in September 2020, the entirety are licensed shows that once seemed niche.

While Netflix uses their originals to take niche concepts and make them mainstream tentpoles, Hulu leverages licensed content that was once niche hits and that become mainstream streamer tentpoles today.

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Take for instance, RuPaul’s Drag Race or My Hero Academia, which are among the top 10 most in-demand titles on the platform. These two shows are undoubtedly high quality hits that have grown fandoms of their own, but Hulu has played an important role as a second or third window. The demand data suggests it has at least in part helped extend the reach and the popularity of these shows that have exploded in 2020.

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The use of Hulu as a gateway to new audiences that find cable’s niche mainstream is not only true for existing multi-season content, but also for cable’s newest debuts which I’ve seen evidence by FX on Hulu.

Audiences, Audiences Everywhere

Threats to cable’s debuts’ success include the challenge of hooking audiences after the first episodes and the competitive buzz binge-released shows can create (see our release strategy series). Meanwhile, the months-long wait until debuts are digitally available for cord-free audiences may lead to lost opportunity for creators as content becomes less relevant and competition builds.

Hulu has exemplified that releasing digitally and linearly monetizes the attention of two different audiences sooner: the cable-lover and cord-never. Thus demonstrating that the digital age is redefining and blurring the concept of niche by expanding audience reach.


Let’s consider FX’s recent debut Dave, which released episodes on Hulu only a day after premieres on cable.

  • Dave’s demand experiences a drop off between episode one and two, which is typical, but more than recovers by episode 4.
  • Also, with each episode released there are two days of peaked attention rather than the typical one day.

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Above I’ve worked with Parrot Analytics to compared Dave’s demand to the average weekly released cable title in 2019. The difference appears to be significant.

These findings suggest Dave benefited in the extra reach provided from Hulu’s access to cord-free audiences.

One Size Doesn’t Fit All

Hulu leverages the structure of its catalog and its offer as a second window to further blur the lines of digital and linear via its hybrid model: offering an AVOD, SVOD, and LIVE TV package.

The increased flexibility in user-experiences for traditional and newer generations gives Hulu flexibility in monetizing its content.

In 2017, Hulu added LIVE TV with an additional charge. In just three years, this has proven to be a lucrative decision. Hulu + Live TV finished last quarter with a record 3.4 million subscribers, beating the US News ranked #1 streaming bundle, YouTube TV, which reported two million subscribers.

Hulu’s LIVE TV may not have extensive channel options, but it offers classic staples of LIVE TV such as news, sports, and important events that generations growing up with cable find essential. But, what has driven audiences to prefer Hulu over YouTube?

I predicted it was Hulu’s provides a content offering that better sits at the cross-section of cable lovers and cable nevers. To test my thinking, I wanted to examine a high-performing genre for Hulu: comedies.

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What offering influences LIVE TV subscriptions? The data reveals the few quality highly in-demand comedy originals are tipping the scales for its LIVE TV subscribers. This provided more evidence in support of my theory that Hulu’s success comes from its “yes-digital and linear” approach.


While comedy originals support LIVE TV subscribers, Hulu’s extensive highly in-demand comedy exclusive titles (originals and licensed) appears to support greater ad-revenue. Ads have made cable the “cash cow” of the industry, but analysts expect shifts in ad-spend towards streaming. In fact, ad spending on streaming services passed 1 billion dollars, an increase of 205% compared to 2019, in the first half of 2020 with Hulu being in the lead. This undoubtedly sustains its massive library without the income from selling shoes like Amazon Prime.

The average cable-lover is likely more accepting of ads given they are accustomed to them and persuaded by the low price for which they receive the large catalog. Cord-never generations, which see ads as unacceptable inconveniences may appreciate the competitive price of ad-inclusive subscriptions beneficial until they have enough money to pay for premium.

Thus the ad-supported and LIVE TV options powers Hulu’s ability to unite generations.

Too Good To Be True?

So far, so good for Hulu. But as I said, the streaming wars are really just starting to get into the swing. And, have been absolutely impacted by COVID-19.

As Peacock, Paramount+, and HBOMax have began reclaiming content for their platforms, Hulu stands to lose licensed content that contributes to its blockbuster TV, LIVE-TV strength, and ad-revenue, as more decide to go from linear to digital and more aggregators join in on the streaming wars.

Thus, Hulu’s success is dependent on other’s seeing the value of leveraging it as a second or third window. Hulu will need to prove that it can offer value to competitors as a distributor of their original content. If Hulu can evidence that partnership offers symbiosis, Hulu can maintain its equilibrium otherwise this threatens to dissolve the delicate balancing act Hulu has accomplished.

Moreover, Hulu may be threatened by the relationship other hybrid model streaming platforms have with cable providers. So, the question is: how can Hulu ensure that others cannot replicate its model at a cheaper price or with a better offering? Only time will tell.

Are you still watching? Up next, how to allocate assets to maximize revenue from my friends at Parrot Analytics.

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