What Disney's Hulu Investment Means

by Eric Franchi, May 4, 2009, 1:15 PM

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For all the talk about YouTube and Hulu in the trades and mainstream press, did you know that Hulu only recently became the third largest online video destination? According to comScore, Hulu's 380 million videos viewed eclipsed Yahoo's 335 million in March. At this point, it also puts Hulu within striking range of number two ranked Fox Interactive Media's 437 million. However, to put it in perspective, YouTube streamed 5.9 billion videos in March. Only when you look at these statistics do you get an appreciation for the size of YouTube.

However, size isn't everything when it comes to advertiser dollars. That is why the ad industry pays very close attention to all things Hulu, whose premium video platform is estimated to attract $120 million in ad revenue this year compared to YouTube's $200 million, despite the size difference.

The connection between premium video and advertiser dollars is also the reason why Disney Corp. made the strategic investment to purchase 30% of Hulu for an undisclosed sum. This gives Disney the ability to reach a far larger audience via Hulu than its current ABC video portal. It also gives Hulu access to an amazing library that includes current hits "Lost" and "Desperate Housewives. " Disney now has three board seats in the venture, alongside NBC Universal and News Corp.

The investment serves to not only underscore the importance of online video -- this is one of the few online deals Big Media has made in recent memory -- but it validates the Hulu model of aggregation. It will be interesting to see if Hulu's pace of growth can be maintained from a user perspective.

One of the benefits of the partnership should be additional promotion for Hulu. The recent TV spots featuring high profile actors like Alec Baldwin can be at least partially credited for its recent jump in the rankings.

The question that remains, then, with a growing Hulu threat, which of the following media powerhouses will be changing their strategy -- or doubling down and getting even more aggressive -- to compete?

CBS: Which has thus far resisted a Hulu partnership, focusing instead on its TV.com site.

Apple: Which has made it very clear that its long-term focus is on a paid, rather than ad-supported, business model.

YouTube: Revenue-share agreements have proven not to be enticing enough to Big Media. What can it offer in exchange for access to more premium content?

What do you think?

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0 comments on "What Disney's Hulu Investment Means".

1. Cesar Brea from Force Five Partners
   

   commented on: May 4, 2009 at 2:47 p.m.

   Interesting article, but may I suggest alternative metrics? Hulu content -- a 30-minute sitcom, a 60-minute drama -- are longer than YouTube's two-minutes-of-fame-for-Fido-skateboarding of course, so maybe ad dollars per minutes streamed? Or, since presumably you can only serve so many ads regardless of how long the content runs, ad dollars per unique visitor? Related: http://www.octavianworld.org/octavianworld/2009/05/aols-future-our-phds-can-beat-up-your-phds.html

2. Drew Robertson from localbroadcast.tv
   

   commented on: May 4, 2009 at 3:14 p.m.

   Did anyone see Gordon Borrell's ad revenue numbers for internet radio? More than YouTube (or Hulu). I know it's apples and oranges. Nonetheless it's pretty clear that radio had an internet revenue model that is sustainable. You can't say that about internet video. Why? They killed the local station linear programming model for WIWWIWIWIWI.

3. Gordon Vasquez from RealTVfilms.com
   

   commented on: May 4, 2009 at 3:55 p.m.

   The numbers are great whe you look at Ad Revenue between Hulu and YouTube -- amazing.

   Keep producing premium content and the chips will fall in place -

   Gordon@RealTVfilms.com

4. Pinaki Saha from Me!Box Media Inc.
   

   commented on: May 5, 2009 at 12:22 p.m.

   Disney may be eying a bigger piece of the pie. Trying to get into the distribution game while the market carves out for online video over the next 1 year.

   Wonder how much Steamboat Ventures playing into this. Remember one thing.. the aggregation model does collect usage metric for different viewership around ads and content.

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