Hulu Online

Big news for online media came on Monday with the launch of Hulu. Couched early on as a response to YouTube and an effort to grab the attention of online media viewers, Hulu represents a joint effort of NBC and Fox. According to Wired, “Hardly impressed with YouTube’s attempts to placate copyright owners like themselves, the two media giants set out to create their own online distribution platform, called Hulu, which launches to a limited audience today.” Hulu will offer video streaming of full-length television shows, both new and old, as well as some full-length movies. All will be available on the Hulu site as well as via sites of distribution partners.

Of the endeavor Dan Fawcett, president of Fox Digital Media, said “We think our content will be available broadly, and hopefully monetized in a fashion that makes money for us and makes it a good experience for viewers.” As for the first part, being broadly available, that is off to a good start thanks to Hulu’s distribution network which includes big names such as AOL, Comcast, MSN, and Yahoo!. In regard to the latter part, being a good experience for users, some reviews note that this is already a success. Bloggng for CNET Greg Sandoval writes, “a review of a test version of Hulu, which launched Monday, reveals that Hulu nailed the basics.” Wired and Salon both agree with that assessment, “Based on our test drive, it seems like Hulu got most of the formula right,” states Terrence Russell of Wired. From the Salon review, “But look, Hulu is here, on time! And it’s excellent.” However, it is the middle part of Fawcett’s comment, that Hulu will make money, which has yet to be seen.
Prior to the launch much was made about Hulu being largely an attempt to woo users away from YouTube where clips are watched for free. To a certain extent this is true; though some see YouTube as a path to exposure the large content providers see YouTube as at best a sinkhole and at worst a thief. Viacom has already sued YouTube for $1 billion alleging copyright infringement. What is closer to the truth is that Hulu creators are after the advertising dollars. The Interactive Advertising Bureau estimates that the online advertising market for the first half of this year was $10 billion dollars. To make a grab at that cash Hulu will run advertisements similarly to the way they appear on television, primarily in 15- and 30-second spots during full-length shows. (It works out well for Hulu that the shows are already edited for television to accommodate this.) At the moment there are not plans to add third party ads.

As for the comparison to YouTube, it pretty much falls flat. The two sites may be after the same demographic, users comfortable viewing online video, but the content they will provide to those users is completely different. For the most part, YouTube is user generated clips, Hulu is much closer to television: full-length shows (complete with the advertisements), and movies. Aram Sinnreich, managing partner with Radar Research, says, “They’re competitors in the sense that they have video content online, they want to sell ads and they want to capture user minutes and eyeballs, but other than that, they’re completely different kinds of ventures.” Though not a direct competitor, YouTube does have a few things going for it which are noted as challenges Hulu will need to deal with. For one, YouTube faces no cost barriers for its content, it is user supplied. YouTube also does not need to share its advertising revenue, unlike Hulu which will split it with content owners and partners.

Hulu will also face itself in the arena. Both NBC and Fox will continue running the same content on their previously existing sites. This is making people ask if users will feel the need to visit Hulu when they already watch programs on Fox.com and NBC.com. What the two companies are trying to do by coming together and creating Hulu is become the one place users go for online programming. However, while much is being made about the content it has available, Hulu is not the only place to go. In addition to the sites of the two parties involved, their major competitors, the other networks, also offer streaming broadcasts. While its owners want Hulu to become the destination, whether or not users feel they need one is still being debated among analysts and commentators. In addition to facing the competition of other sites Hulu is strapped by not having more content. As the New York Times points out, “If it wants to become the true destination site for professionally made TV shows and movies, it must attract other major content providers like Viacom and Disney. Those media companies reportedly rejected previous offers to participate in the service.” The same is noted by InformationWeek, “Although Hulu has some big backers, it won’t have content from some of the biggest entertainment companies, such as CBS, Viacom, and ABC, which is owned by Walt Disney.”

While much is being made of what the new venture is up against, Hulu not only faces challenges, it poses them as well.

Some say Hulu is already a threat to cable television. TheStreet.com states, “Hulu.com has been billed as a rival to YouTube, but Google’s popular video site has nothing to worry about. The real victim here will be cable TV.” “As consumers get more access to their favorite TV shows and movies through their Internet connection, they’re going to start asking themselves why they’re paying their cable bills,” says Forrester Research analyst James McQuivey. “It’s time for cable companies and telco TV providers to go on fear watch,” McQuivey adds. These cable companies should be wary, not just of the potential loss of viewers, but the (accompanying) loss of advertising dollars. “When you have TV-style advertising on the Internet, suddenly these people on Madison Avenue are Internet enthusiasts. They are going to accelerate the move of budgets from TV to the Internet because they are so whole-heartedly jumping in,” McQuivey noted. If that proves correct, Hulu could start to see a piece of the TV advertising pie which Forrester estimates at about $70 billion a year.

Hulu will be an interesting experiment to watch. It may succeed, it may fail, or it may morph into something else altogether. But whatever happens next Hulu will likely be a catalyst.

A more complete version of this post, including links to market research, can be found at the website of Analyst Views Weekly.

More information on this topic can be found in the Electronic Content & Media section of Northern Light’s Internet & Information Services Market Intelligence Center.

And in the following articles:

NBC Looks for Ways to Put Its Shows Online Profitably

Boston Globe, October 30, 2007
NBC Universal is trying to find profitable ways to make its TV programs available online after discontinuing sales of new shows on Apple Inc.’s iTunes, chief executive Jeffrey Zucker said. NBC yesterday started testing Hulu, its online video joint venture with News Corp. The website is an experiment for NBC, along with NBC.com, Zucker said at an event in New York.

Hulu Readies Its Online TV, Dodging the Insults
New York Times, October 29, 2007
Hulu is the new-media creation of two old-media rivals, NBC, which is owned by General Electric, and Fox, owned by the News Corporation. Since March, when the broadcasters announced their joint effort to bring free, ad-supported television shows to the Web, critics have pounced, predicting the venture would be doomed by diverging agendas, technical challenges and an all-powerful enemy: YouTube.

Hulu to Hurt Cable, Not Google
TheStreet.com, October 29, 2007
Hulu.com has been billed as a rival to YouTube, but Google’s popular video site has nothing to worry about. The real victim here will be cable TV. Hulu, an online video site that went live with a test version on Monday, was developed in a partnership between General Electric-owned NBC Universal and Rupert Murdoch’s media empire, News Corp. Unlike YouTube, Hulu offers free viewing of full-length films and TV shows from the media giants.

First Look: Hulu Combines Ease of Use, Content, Advertising
Wired, October 29, 2007
Broadcasters can’t deny that video-sharing sites like YouTube have promotional potential, but NBC Universal and News Corp. have had enough. Hardly impressed with YouTube’s attempts to placate copyright owners like themselves, the two media giants set out to create their own online distribution platform, called Hulu, which launches to a limited audience today.

NBC, News Corp. Threaten Apple with Hulu
InformationWeek, October 29, 2007
NBC and News Corp. on Monday launched in beta an online video service that offers ad-supported video and feature films, a model that undercuts the buying of TV shows and movies through services like Apple iTunes.

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