The free online television service has become one of the most-watched online video properties in the U.S. and a top earner of web-video ad dollars since its 2008 launch.
But its owners—industry powerhouses NBC Universal, News Corp. and Walt Disney Co.—are increasingly at odds over Hulu’s business model. Worried that free Web versions of their biggest TV shows are eating into their traditional business, the owners disagree among themselves, and with Hulu management, on how much of their content should be free.
Fox Broadcasting owner News Corp. and ABC owner Disney are contemplating pulling some free content from Hulu, say people familiar with the matter. The media companies are also moving to sell more programs to Hulu competitors that deliver television over the Internet, including Netflix Inc., Microsoft Corp. and Apple Inc.
I had my worries about Hulu from the start, mostly because it was owned by a network (NBC). Never underestimate the power of a network executive to screw the customers.
In all seriousness, though, I think it was an unfair advantage, owning a significant chunk of content that you could then hold back from other competing services.
Two things that surprised me about Hulu’s success: First, the fact that people were willing to watch TV on their computer screens only. (When introduced, Hulu was strictly computer-only—there was no TV streaming option of any kind.) This continues to boggle my mind. The idea that you have a 42″ plasma tv in the living room, but you’re going to watch shows on a 15″ laptop with crappy speakers. Where’s the logic in that?
Second, the fact that it was ad-sponsored. The ads surprised me because I honestly thought people would not want to sit through ads anymore. (This was supposed to be a re-invention of TV, not a rehash of the old system.) Certainly, a dollar or two per episode was a better option than sitting though boring ads, right?
More importantly, I thought there was no way the ads on an Internet service would come close to making up for the difference in ad revenue on network television. In other words, as more people flocked to Hulu and ditched their traditional Cable TV viewing, the networks were going to lose money and figure out that web ads weren’t enough. Web ads are literally worth pennies vs. TV’s six-figure ad buys. The business model was not sustainable long-term.
That second part seems to be coming true. (Admittedly, I was wrong about the first. People really are freetards, when you get right down to it.) So now millions of Hulu users are going to be bait-and-switched into some new version of the service that costs them in some way. I wonder if they’ll be smart enough to revolt, or if they’ll just start coughing up the cash to feed their addiction?
I’m sure NBC will find some way to make the service completely unusable for everyone.