Even though Hulu CEO Jason Kilar calls his service “incremental and complementary” to cable, the online video hub’s potential fall IPO is a testimony to the transition of TV across screens and the rapid growth of OTT (over-the-top) services.

OTT delivers IP video to end users over third-party broadband using gaming consoles, set-top boxes, and other devices to connect the Internet and TV. The upshot: The ”cord is cut” on cable.

BIA/Kelsey projects that OTT will surpass cable within three years, reaching 62 million homes by 2013 as consumers demand greater customization and control of their content. Hulu is the most watched OTT service, with 53 percent of all OTT users accessing it. Notably, 42 percent of those viewers already watch at least some Hulu programming on their TVs.

The timing of the reported public offering is especially interesting considering that Hulu — a joint venture of News Corp., NBC Universal, the Walt Disney Co. and Providence Equity Partners — reported only $100 million in income last year and is yet to release tangible revenues from its recent rollout of the $9.99 per month Hulu Plus premium service, which aims to create a second revenue stream alongside its core advertising business. ComScore reports that it did serve up more than 780 million video ads in July, far and away the most of any online video property.

A Hulu IPO, coupled with mounting research backing OTT growth, should motivate local broadcasters to take notice of the migration of Internet TV onto traditional screens. Competition is deepening. TV viewership, while growing, is also fragmenting, with more sources of video and more devices delivering it. OTAs can pursue a multitude of strategies, both a source of opportunity and confusion.

Broadcasters will need to foster partnerships in order to build the necessary infrastructure to provide OTT services. With that in place, a coherent OTA + OTT offering could unlock new revenue streams and afford consumers a richer viewing experience.

Tags: cable TV, Hulu, OTT

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