Hulu was a leader when it came to driving eyeballs to the web to watch long form video content. But, did they prove a concept which someone else will ultimately take over? Often times in a new product category, the one that gets to the market first doesn’t always control the market forever. Sometimes, strategic advantages win versus staking the first claim to the category.
As written in the LA Times, “Hulu rocketed to popularity since its launch…by offering free online access to television shows, often as soon as 24 hours after the programs first air.” The site was launched as a strategy by its media owners to repel piracy, but became so popular on its own that it caused a problem with distributors, cable operators and satellite providers. Why, they asked, should they continue to pay the broadcast networks billions of dollars for their shows if they were going to be given away online for free?
Now, as we all know Hulu is for sale. But, a key challenge for any potential buyer will be securing long term content commitments from the companies looking to sell Hulu in the first place. And, if they do make them available, how soon after the initial broadcast will they are able to be seen? This is obviously a major consideration, and a point of difference for Hulu that can easily be lost. And, with that loss, may go millions of eyeballs from the site.
One onerous issue under consideration by Hulu’s owners is to require users to “authenticate” that they are cable or satellite subscribers. According to All Things D, in reference to “authentication”, “If it [the need to authenticate], is true, you can go ahead and mark Hulu’s sales price way down.”
This issue raises two immediate questions. If visitors use Hulu because it is a painless service to use, will they put up with this hoop that they now have to jump through? Also, what if they are cord cutters? Does that mean that they can never visit Hulu again? I wonder what percentage of cord cutters visit Hulu and the network sites themselves instead of paying for a cable subscription. If it turns out to be a significant enough percentage, then Hulu could lose many of their 28.5 miilion monthly viewers. Those viewers turn into ad revenue, so a significant loss makes Hulu a less relevant advertising vehicle for media buyers.
The content providers that own Hulu just went through a successful upfront that generated billions of dollars in revenue. This was an upfront that showed solid increases versus 2010. The ad business clearly doesn’t value a web eyeball anywhere as much as they do a TV eyeball. So, letting this outlet undermine those billions by giving away the content makes no sense. A solution for them is to get rid of it and not in any way cannibalize their existing ad sales business.
Another comment from All Things D to consider, “ And again, it’s [the competing business models between broadcast television and online video], the kind of problem that any potential Hulu buyer needs to consider: The people who own Hulu are the ones who provide it with almost all of its killer content, and they’re not gung-ho about making the thing work. What happens if they don’t own the company at all?” Will the owners wind up with a hand full of sand?
According to rumors from people that have heard the Hulu pitch, they are positioning themselves as a competitor to cable. As noted above, cable operators pay their current owners, and future content providers billions in revenue. Having Hulu appear to interfere with that long term revenue stream is potentially dangerous. Yes, more and more people are viewing video content online, but the migration is not that fast, and the ad community isn’t fully on board yet.
As reported on 7/19 in Fierce Cable, “Hulu plans to offer suitors five years of access to shows from its media-company owners, including two years of exclusivity, two people with knowledge of the situation said. According to Bloomberg’s sources, TV networks would still be allowed to post shows on their own sites during the exclusivity period, and there would be exceptions for on-demand services.”
Despite the latest sweetener, is it caveat emptor for any potential buyer?