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Last week, the discussions around Hulu shifted, as a key executive talked about the future of the online service and the possible move to make at least part of the content available through a pay model.Based on the slow advertising sales that Hulu has seen so far, it is not a big surprise that this idea would come up.With all the discussions around consumers potentially leaving pay-TV services like cable and satellite for free online content, I think this is very good news for the pay-TV operators.

Comcast and Time Warner have been making strong moves to create their TV Everywhere services, tied into being an existing subscriber.These services would essentially be free to the subscribers, allowing them to watch content online through a verification and validation system.If more of the pay-TV operators roll out similar services across the country, online video services like Hulu will be placed in a difficult position, as consumers typically wont pay again for something they are already paying for.Plus, the breadth of content offered by the pay-TV operators will likely be much larger than what is offered by any individual online service.

It is unlikely that online video services will be able to support themselves through an advertising-only model at least in the short term.I would expect that we will see more moves to paid models, or a growing number of partnerships between online video services like Hulu and the pay-TV operators, similar to what we see with AT&Ts Entertainment portal.The latter allows the operator to retain a branding opportunity, while expanding viewing opportunities for subscribers and reducing churn.Either way, online video will most certainly continue to grow, but will not likely pose a serious threat to traditional pay-TV services for some time.

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