What the new Hulu has in common with Voom

Voom and Hulu logos

Hulu’s announcement last week that it would offer almost* commercial-free programming for an extra $4/month reminded me of its connection to the former Voom Networks. That connection is only in my mind, unless you want to buy into the following conspiracy theory.

First, let’s talk Hulu. It’s owned by three of the six large content companies in the US: Comcast (NBC), News Corporation (Fox), and Disney (ABC). Hulu’s primary distinguishing feature as an over-the-top pay-TV service was its long-time insistence on including commercials, even though it knew that was an issue for potential and current paid subscribers. Then why did it take so long for Hulu to offer a higher-priced, ad-free* version? I assume it’s because its owners, three major TV networks, did not want audiences to get used to the idea of watching regular TV shows anywhere without commercial interruption.

Back in the days when TV stations used only the public airwaves as a free service, advertising was the only way to pay the bills, yet broadcasting was mostly a lucrative business. When cable permeated America, many stations also picked up retransmission consent fees, which have risen astronomically since. In time, the major networks got a piece of both of those revenue streams, but it must have been baked into the content providers’ minds that commercial interruption was a lifeline that they would not easily relinquish.

Now to the conspiracy theory. In 2003, back when HD programming was unusual, Cablevision launched Voom, a standalone satellite TV service with 21 channels of commercial-free HDTV. In 2005, Dish Network pretty much bought out Voom’s satellite lease and resold the Voom channels to Dish subscribers. That’s where I came in; I loved Voom’s colorful, uninterrupted programming, and they soon became some of my favorite Dish channels.

(It’s important for me to point out here that, although I was both a Dish beta tester and shareholder at the time, I had and have absolutely no inside information about anything that happened between Dish and Voom. The theory I concocted is based only on public news accounts, of which the Wikipedia entry is a decent summary, and there’s an excellent chance that it’s completely wrong. But my theory is entertaining to consider, and it mostly fits what we know.)

Voom was rolling along. It had a 15-year contract with to Dish to distribute its programming, which it was selling to over a million subscribers. The only hint of a problem was that Voom content was becoming a bit … repetitive. A lot of the series on its schedules, mostly foreign imports, remained the same.

In January 2008, Dish tried to end its contract with Voom, saying that Voom hadn’t invested its required $100 million in content in 2006; Cablevision offered what it said was proof that it had followed the letter of the contract. In May 2008, without warning, Dish dumped all of the Voom channels, replacing them with roughly equivalent channels, such as Palladia substituting for Voom’s Rave HD music channel. Without a major distributor, Voom closed up shop a few months later. Meanwhile, Voom’s owners sued Dish, and then things got really weird.

In November 2010, New York state judge Richard Lowe ruled that Dish’s then-parent Echostar had “systematically destroyed evidence in direct violation of the law” by erasing emails. Lowe said he would instruct the jury to assume that those emails would have helped Voom prove its case. Despite that hefty sanction, the case continued to trial in September 2012. Just before Dish CEO Charlie Ergen was due to take the stand, Dish settled the case, paying over $700 million to Cablevision.

To recap, it appears that Dish was making a profit on every Voom subscriber, yet it decided to fatally wound the service and then wiped evidence that would explain why, even though that would end up costing Dish almost three-quarters of a billion dollars. Until Ergen writes his memoirs, we’ll never know why Dish did that, so let me make up something that fits.

Dish needs decent relationships with the folks who create its channels. Those are some of the same people who fought so hard and long against letting Hulu subscribers watch TV without ads. Voom’s channels had no ads. What if the big media companies put pressure on Dish to dump the Cablevision-created upstart and substitute similar, ad-supported programming? There’s no way Dish would have chosen Voom over the six huge companies who control Dish’s bread-and-butter channels. Could they have wielded the stick of threatened channel blackouts or the carrot of improved contract terms to offset the cost of deleting all the emails associated with those conversations? There’s no way of knowing, but that sure matches the mindset of those Hulu owners.

*Even when it tried to create an ad-free service, Hulu couldn’t make it 100%. As the signup page states, a few shows are not included “due to streaming rights”. Subscribers still have to watch commercials before and after Grey’s Anatomy, Once Upon A Time, Marvel’s Agents of S.H.I.E.L.D., Scandal, New Girl, Grimm and How To Get Away With Murder. Those all have ties to the owners’ production companies, and I guess they can’t let go.

Leave a Reply

Your email address will not be published. Required fields are marked *