Feeds

Pay TV giant Hulu becomes victim of its own success

Latest rumour of CEO's departure heralds end of stormy honeymoon

Boost IT visibility and business value

The latest rumour of Hulu CEO Jason Kilar’s imminent departure sounds like a good old silly season story designed to fill the void of empty news pages while people are on vacation. But the fact Hulu has been attracting such rumours while other big hitters in pay TV never seem to get them, itself provides a clue to a story of declining fortunes for the operator.

As the offspring of Disney, News Corp and Comcast, Hulu’s differentiator has been its range of popular TV shows, about twice as many as Netflix and far more from the current season. Netflix does have more premium movie content, but Hulu’s loss of exclusive current season content rights for Disney and News Corp channels would appear to rip its business model apart. This is the real sting in the memo famously leaked to Variety magazine, which would in effect make Kilar’s departure inevitable anyway. Dated July 2012, the memo covers various sensitive issues, indicating how two of the parent companies, News Corp and Disney, plan to transform the streaming service.

The memo appears to deliver Hulu three blows.

  1. Loss of exclusive current-season content previously shared online only with the Networks’ own websites.
  2. Loss of content parity with the Networks ABC.com and Fox.com, which will no longer have to make all content available on Hulu at the same time as their own sites, which previously ensured that Hulu at worst had content the same time as everybody else, whether exclusive or not.
  3. Hulu will lose exclusive “super-distribution” rights that enabled it to syndicate content to third-party sites like Yahoo and AOL. Such rights will now revert back to the primary sources, Disney and News Corp.

This all goes back to Hulu’s inception in October 2007 as a foil for Google and YouTube, which were seen then as a big threat to the big studios and content houses. Hulu was conceived as a focal point for its owners to exert greater leverage in rights negotiations for online distribution, rather than as a viable business proposition in its own right. In one sense Hulu has since become a victim of its success, tangling with the emerging online business models of its parents. With their focus on content they are most interested in maximizing their carriage rights from all sources, rather than giving them away free without restrictions on Hulu. They have lost their fear of Google, reducing their need for a single portal for negotiations, and as a result Hulu is no longer necessary for them and has become almost a thorn in their sides.

This means Hulu is entering a new uncharted and uncertain phase for which Kilar may be unequipped and unwilling to pull up his sleeves to defend a most likely shrinking position in the fast expanding OTT market. Either that or he is too ardent a fan of keeping his exclusive status with the content of Hulu’s parents. Netflix will now have the upper hand in the US through its superior movie content while being likely to gain parity for TV shows. Instead of being the primary place on the web to view TV shows from Fox, NBC, and ABC in the US, Hulu will become just one of many sites where the content can be obtained.

Its owners will continue to run Hulu as a subscription service, since from this they derive ancillary revenue. But it will not be a cornerstone of their online strategies as it has been, and they will no longer allow it to compete as a free service with their own sites, or to jeopardize their ability to obtain carriage fees from other online distributors.

In short Hulu has a smaller future than past, but still has the opportunity of remaining a significant player in the US market if it can strike the right balance between subscription and ad funded programming.

Copyright © 2012, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

The Essential Guide to IT Transformation

More from The Register

next story
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Feel free to BONK on the TUBE, says Transport for London
Plus: Almost NOBODY uses pay-by-bonk on buses - Visa
Amazon says Hachette should lower ebook prices, pay authors more
Oh yeah ... and a 30% cut for Amazon to seal the deal
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.