Disney-Hulu: What does the deal mean for Apple? (BW)

By Nancy Tartaglione

With yesterday's announcement that Disney has become an equity partner in Hulu, and will begin streaming ABC TV shows as well as a library of films, the viability of Apple's pay-as-you-go iTunes download business could be tested, opines Business Week.

While attention immediately turned to what the deal means for YouTube and CBS, the only major network outside Hulu's orbit, BW says the Disney-Hulu content-sharing arrangement may have even bigger implications for Apple - a company that neither creates video content nor distributes it free online.

The more popular Hulu becomes, the less compelling Apple's strategy of renting and selling video content online is, Gartner analyst Michael McGuire, told BW. "Over time, perhaps the direct-payment model goes away."

Should Hulu be able to strike content-sharing partnerships with cable companies, analysts say it could become an even bigger threat.

When Hulu was announced in 2007, folks were skeptical of its potential. Yet, the site quickly became an online destination for watching premium movies and TV shows. Now the No. 3 video site, Hulu stands to convince consumers they don't need to purchase downloads from the likes of Apple.

Meanwhile, a deeper foray onto Apple's turf may be in the works. According to BW, industry insiders say Hulu is working on an application for Apple's App Store that would let iPhone and iPod Touch users stream content to those devices.

Still, no one is counting out Apple. Users downloaded 1 billion App Store applications in just nine months and the company is present in homes with Mac computers, its Apple TV product and a growing stable of portable devices capable of receiving, storing and streaming video, notes BW.

Most analysts expect Apple to unveil an upgraded iPhone in June, when it has said it will introduce new software dubbed iPhone 3.0. A person familiar with Apple's plans told BW it's simple to record and edit stunningly sharp video with the device—and then wirelessly send it out with a few clicks or watch it on the phone's improved screen. Such technology also could be used to send clips of TV shows or movies to friends.

By the way, notes BW, never mind that Apple CEO Steve Jobs is Disney's largest shareholder. Hulu's Disney deal should come as a reminder that if Jobs & Co. want to make the splash in online video they appear poised to make, Apple needs to act fast.