The launch of subscription service Hulu Plus on Apple TV is more than just another incremental video distribution deal.
It should be a win-win for both companies, and most importantly — it gives us a glimpse of what Apple has planned for its Apple TV service.
CEO Tim Cook is clearly looking to make Apple TV the destination for premium content without a cable subscription, even if that means opening the door to more competition for Apple’s iTunes. This announcement is a big deal, in that it’s the first time ad-supported TV content is available through the Apple TV box.
Bottom line: The future of Apple TV may be less about a gadget, and more about access to premium content.
Apple is making a carefully calibrated tradeoff. It’s giving Apple TV owners easy access to Hulu Pluscontent, which competes with some of Apple iTunes’ video-on-demand offerings. But it’s willing to make that compromise to amass the kind of premium content to help it sell more Apple TV devices.
Plus, it’ll earn some incremental revenue from selling access to Hulu Plus through iTunes — we can assume it’ll get a cut of the $8-a-month subscription. And it’ll get access to more information about all those subscribers.
Hulu should benefit too — the device should drive new subscribers to its service. Plus, even more important, all those extra viewers will provide additional TV ad revenue.
Since Hulu is serving up those ads within its app, it’s unlikely that the video streaming service will have to share its ad revenue. This isn’t the first app with ads — WSJ Live, which was added to Apple TV last October, had ads. But this is certainly the biggest video app to launch with ads.
With this deal Apple TV’s content is catching up to competitors like Roku and Microsoft’s Xbox 360. We’ll see what Apple launches next — either in terms of functionality or in terms of content — to distinguish its Apple TV from the other “over-the-top” set top boxes.
—By CNBC's Julia Boorstin
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