Time is running out for “hundreds” of “incremental spin-off [pay TV channels] that came up since the late ’80s,” Fox CEO James Murdoch told an investor gathering this morning.

Cable and satellite companies may have to dump lots of them as they begin to compete with lower cost services — including the live video streaming service that Hulu plans to introduce by early next year.

Launch plans, including licensing negotiations with networks, are “well underway” Murdoch said at Bernstein Research’s Strategic Decisions Conference. Hulu — co-owned by Fox, Disney, and Comcast — will offer fewer channels than the conventional expanded basic bundle, at a lower price.

This shouldn’t kill the industry’s pay TV golden goose, he adds. Fox and other network providers already license to multiple, competing providers, including Verizon’s FiOS and AT&T’s U-verse.

“We see this as very much the same situation….This is just another wave of distribution technology.”

He questioned the basic definition of the pay TV business. “The way it’s been looked at here: There are a fixed set of competitors that are the ‘pay TV industry,’ and new competitors that ask customers to pay for TV are somehow not part of that industry. They’re the same industry. To customers — they’re giving a credit card to a company that’s delivering video services to their house.”

Besides, he calls it “inevitable” that cable providers themselves will expand out of their current markets and compete with each other — even though “they all deny it.” At the end of the day, “there will be many new entrants.”

And new services could “spur more innovation” in an industry where the “cost has been too high.”

That’s partly due to the inclusion of  “channels that the customer doesn’t need…That will be a hard question: What will we decide not to have?” In addition, bills are larded with “a lot of charges that are totally irrelevant” to Fox, including set top box fees.

He’d like to see pay TV providers offer a broad array of bundles and prices. “There’s a lot of room to innovate from a pricing and packaging point of view…We want to be a part of that.”