Hulu: The Missed Opportunity to Crush Netflix and Transform the Cable Model

NEW YORK ( TheStreet) -- Before you flame me, I recognize that several layers of crap keep individuals and companies from making bold, common sense or "right" moves across spaces, particularly in the media. At least that's the going excuse. It will never happen because ...

For example, in social media, there's no question: Twitter (Proposed Ticker: TWIT) and Facebook ( FB) should merge. But ego and hipster/engineering-geek (strange mix, I know) posturing keeps that from even making the radar.

In the new media vs. old guard media's sort-of-on, sort-of-off relationship, you hear loads of It will never happen because ...

Believe me, I understand this. I can get with the walled garden approach. Ultimately, I even advocate Time Warner's ( TWX) approach to disseminating its content over Disney's ( DIS), at least insofar as the latter's recent deal with Netflix ( NFLX) is concerned.

But, why even give Netflix the time of day to begin with? I'll never understand that. If I own the key content, I do one of two things:

One, I continue along with the disparate offerings. HBO GO here and WatchESPN there. You know -- the idea of TV Everywhere where content providers create their own Web platforms and distribute the content to pay-TV subscribers and/or viewers who subscribe to the standalone digital service. The former is, at the moment, much more common.

Two, I monitor the heck out of consumer behavior and, if I give anything up to a "third party," I give it up to Hulu. Forget Netflix. Even forget ( AMZN).

Near term you will not collect the type of icing-on-the-cake revenue Disney just extracted from Netflix or CBS ( CBS) brags about generating via licensing deals on its quarterly conference calls, but long term, you're building a healthier, less messy industry.

CBS executives sound smart today by picking up money that's right in front of them, but it's short-sighted and dangerous. They're hurting their company. They're hurting Netflix. And they're hurting the business. It's akin to taking your turn with the loose high school cheerleader. Immediate payoff, but nobody wins in the end.

Forgo instant gratification for a clean, safe and thriving old guard media turned new media powerhouse later.

All individual programming that goes digital should go digital through Hulu. And the now-disparate TV Everywhere offerings should come as a la carte options on Hulu. Give the customer the ability to pick and choose, spend less than $100 a month to get everything they want, excluding sports season packages and cut the cord, without regret, if that's their inclination.

Tell Netflix to take a hike when it says it should be an a la carte offering. That's a bogus smoke-and-mirrors proposition by Reed Hastings until he directly owns enough original content to put forth a worthy platform.

Not everybody will cut the cord. So, while my approach busts open the cable/satellite model, the content owners still have leverage and will collect massive fees per subscriber. Those who cut the cord will use Hulu as the one-stop shop for practically all content.

Subscription and advertising sales drive revenue and profits in this partnership. Netflix goes by the wayside and Amazon and other middlemen must completely rethink and abandon their approaches to digital video content.

I have been playing around with Hulu Plus lately. It's excellent. Remember, it's a joint venture between Disney, Comcast's ( CMCSA) NBCUniversal and News Corp's ( NWSA) Fox. Because of this you get fresh programming. Last night I could have watched the latest episodes of everything from Saturday Night Live and Jimmy Fallon to the premiere of 1600 Penn.

Hulu needs to give the consumer access to just about everything.

Let subscribers cobble together a monthly digital subscription:
  • Basic package: FREE
  • Hulu Plus: $7.99
  • HBO GO: $19.99
  • WatchESPN: $19.99
  • A bundle of Discovery Communications ( DISCA) and/or Scripps Networks Interactive ( SNI) programming: $14.99 apiece.
  • And then yearly subscriptions to packages such as NFL Sunday Ticket and NHL Centre Ice if the NHL ever comes back!

    That's just back of the envelope stuff there, but if it's not the future, it should be. That's what people are willing to pay for -- exactly what they want and how they want it through one central distribution platform.

    The old guard media -- and all content owners -- need to get on board with Hulu and drive it like they stole as the future of this mega-billion dollar industry.

    Netflix will go out of business. Because, if you really think about it, it's the short-sighted decisions of content providers that permit Netflix to exist anyway. I'm bullish NFLX to a moderate extent because of today's reality. The old guard has the ability to -- and would be stupid not to -- completely alter the way things are.

    It would take them less than a week of not-so-intense negotiations. If Obama and Boehner can do it, cats like Rupert Murdoch, Jeff Bewkes and Les Moonves can.

    --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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