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If Netflix Mattered, Hulu Would Put It Out of Business

At this stage, Hulu only competes with Netflix insofar as the "competition" helps Reed Hastings and Ted Sarandos dig their own graves. Until Netflix can secure a meaningful amount of first-run programming, live events and original programming on par with what AMC Networks (AMCX - Get Report) puts out (forget comparisons to Time Warner's (TWX - Get Report) HBO as they're patently absurd), they're not even competition. Hulu's owners can toy with Netflix by inflating the market price of programming and making other similar strategic moves.

And, let's face it, if that scrap-heap programming Netflix and Amazon bid on had any value the original rights holders would keep it for themselves (see, e.g., HBO's smart insistence on true exclusivity) or license it to their friends. Call it collusion but, if a piece of programming really matters and, for some reason, a big media entity doesn't want to keep it in-house, it's selling to friendly combatants. Keeping it in the clique. Deals like the one Netflix cut with Disney -- which are likely not as good as advertised -- are few and far between.

At this point, the old guard media has no reason to blow up its cush model of collecting fees from cable and satellite companies for subscribers. They control the pace of the metamorphosis to a world where we consume all of our content via an Internet connection and without the need for a traditional subscription. Because of big media's foothold on the most prime programming (live events, first-run TV, appointment viewing, etc.), it has no reason or incentive to blow up its own model before it feels the need. A gradual transition works much better. And it's exactly what we'll see.

Hulu could "unfragment" disparate TV Everywhere offerings in a heartbeat. All it would take are the nation's biggest media executives flipping enough switches to make it happen at a meaningful scale. But they will not. Right now, they'll stick with what's safe -- collecting Netflix's checks (the revenue has become a drug to guys like Les Moonves at CBS (CBS - Get Report)) and sending authenticated feeds to any platform viewers wish to use from mobile devices to a Roku Player or Apple (AAPL) TV.

There's just no reason to do anything with Hulu right now other than keep it on the periphery and let the media perpetuate the dual myths that it's competing with a relevant Netflix.

-- Written by Rocco Pendola in Santa Monica, Calif.

Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.
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