Hulu: Either Keeping Or Selling It Will Annoy Business Partners

Build a cool TV platform and viewers will come, especially if it's free. Also coming will be some tough-minded comments from associated business partners. But consumers rule in this new digital world -- don't they?

Hulu was seemingly rushed to market a couple of years ago by News Corp., NBC and Universal. They were later joined by Walt Disney. All didn't want to miss the boat of what digital video might become, especially looking at the likes of YouTube. For all that TV had done wrong over the years, Hulu has worked so far.

Shouldn't Hulu just keep going as it is -- giving consumers next-day access to network shows?

Hulu has amassed some $500 million in revenue lately. While that sounds great, it still isn't near the $25 billion or so the networks still get from traditional advertising (and they get perhaps another $500 million to $750 million collectively from new and growing annual retransmission revenues).

That's the rub. The $25 billion is the established part of the business. Cable operators, satellite services, telcos and TV stations are big partners, which creates massive conflicts with Hulu. Some believe a large part of this problem can be easily handled -- by making sure those who watch shows on Hulu are also paying customers of cable, satellite and telco companies.

The networks would like to grow the business --- especially to keep high-quality product coming its way. Although Hulu makes $500 million, content owners and developers like "Modern Family" producer Steven Levitan get very little -- or none -- of it.

Media analyst Richard Greenfield believes it would be better for the networks to keep Hulu because it is established, popular -- and here's the key -- a still growing asset. One big issue, he says, comes from those recently aired TV episodes. This can be resolved for TV video retailers -- the cable, satellite and telco companies -- by making sure Hulu viewers are also their subscribers. The long-term worry has been that if viewers can get this stuff free the next day, they wouldn't need need cable, satellite, and telco companies.

Library programming? Those TV video retailers aren't much concerned about it. But TV stations might be, since they still depend on syndication TV dollars. So do producers like Levitan who get the bulk of their dollars from syndication.

Hulu could be sold for as much as $2 billion. Potentials buyers like Google, Apple, Microsoft, cable operators or others might consider that a steal. But all this is a gamble for sure. Something better may come along

The choice for Hulu's owners: Keep it, and hope it will accrue real meaningful national advertising and consumer fees -- or give it up in the hope that network TV distributors, including TV stations, will somehow result in an even stronger TV market in future years.

Tags: television, tv
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2 comments about "Hulu: Either Keeping Or Selling It Will Annoy Business Partners ".
  1. Todd Koerner from e-merge Media , August 25, 2011 at 2:07 p.m.

    There is very little reason for studios/content suppliers to continue serving up programming to Hulu, which will effectively turn it into YouTube, but without the UGC imprimatur.

    Perhaps it can be the new "farm league" for high-quality content, serving as a bridge between YouTube and the studios' sites. But I envision a centralized site or app that serves studio programming, but with much greater studio control. Sort of like a set-top box for the computer.

    Of course, much of this will depend on the innovation that emerges from the hardware technology sector. Once web-enabled televisions or some other lean-back, family room device becomes ubiquitous, then the shift away from traditional broadcasting will reach a critical point.

    Ultimately, Hulu is like the DVD. It served as a bridge between the VCR and streaming technology. Netflix is a good example. The question is whether Hulu becomes Borders or Amazon. Or insert whatever example you deem appropriate.

  2. Doug Garnett from Atomic Direct , August 25, 2011 at 3:01 p.m.

    Great summation. For the past 2 years I've watched the utopian mythology about internet TV develop and wondered when financial reality would start to enter the picture.

    Guess it's starting now. Hulu's got some major hurdles. And, despite it's ubiquitous growth, there's plenty of articles beginning to suggest that there's deep, dark financial realities that threaten to end Netflix's fairy tale.

    We'll have to see. What always strikes me, though, is that the connectedTV enthusiasts haven't come to grips with their $24.5B shortfall. It's going to take a lot of $9.95 subscriptions to get there.