Hulu - Its Own Worst Enemy

One doesn't have too look too hard to find examples of businesses mismanaged into oblivion. Circuit City's recent inexplicable demise is a textbook example. Is Hulu next? It very well may be and here's why.

Hulu has been praised and lamented ever since its launch. Users love the content and the price (free essentially) but content providers want to do everything possible to keep it out of the living room (and frankly, anywhere other than your computer). Don't believe me? Every time someone figures out a way to get Hulu out of your office, Hulu blocks them - all the with the same excuse, "At the request of our content partners." Boxee brought Hulu to the living room? Blocked. PS3 did the same? Blocked. What about mobile phones with browsers? Blocked.

At the same time, Netflix is posting a 28% increase in their subscribers and 24% increase in revenue over last year. How? By trying to provide content to every possible device. They are on dedicated boxes (Roku, TiVo), Blu-ray players (Samsung, LG, Insignia), Displays (Samsung, LG, soon Sony), and game systems (Xbox 360). They probably have scientists working on ways of beaming content to your toaster, bathroom mirror, and hearing aid as we speak.

"But Netflix doesn't have the newest content," you say. While that is mostly true (they often have the recent episodes of popular TV shows like Heroes and 24 the next day and their deal with Starz! has increased the timeliness of their content), that's not the point. The point is that they are doing what successful businesses have been doing for centuries - giving the customer what they want.

What is Hulu doing? Pulling a Sybil on us. On one hand they are trying to stay relevant and provide timely content. They put up episodes of nearly every TV show the next day and keep it up for weeks. It is a central repository of content instead of users having to bounce around the net for what they want. They are a step above YouTube in that their content is professionally done. On the other hand, they are ruled by their content providers that are deathly afraid of losing revenue to this newfangled Internet doohickey. Even though NBC Universal's TV chief, Marc Graboff, has stated that, "Our research indicates that making shows available online has not cannibalized but has been additive," they still block every attempt to utilize their product.

So why is Hulu their own worst enemy? We all know the reason. Fear. They are afraid of losing advertising dollars. So now their solution is to monetize Hulu through subscriptions?

Whatever marketing genius came up with that plan needs to return their degree to the Crackerjack box they got it out of.

Netflix works with a subscription cost because you get the content ad-free AND people are used to paying for renting movies. It's clear that between the streaming and rental services just about everyone comes out ahead. You'd pay way more if you just rent a few movies a month (which most of us would probably do). What is Hulu going to offer (since the subscription model is really the only one that makes sense, how would pay-to-play on Hulu be any different than OnDemand)? I know what they'll have to offer - no ads. No one is going to pay for Hulu if they have to sit through ads. We can do that at the TV. Heck, most of us are using DVRs now so we dont' have to watch commercials anymore. But a couple of 15-30 seconds of commercials per show (Hulu's current model) feels like a joy compared to the 1 to 4 ratio of commercials to content on cable or satellite. 

Let's put it this way content providers: If I had the option of streaming Hulu with commercials for free or paying a monthly change for a DVR, you'd better bet I'd be looking very hard at the Hulu version (I'd probably do both but that's because I'm a Audioholic and other people shouldn't be judged by me). So now, instead of having one shot of getting commercials to the consumer (people that watch it live), you now have two (because you know no one is sitting through those commercials if they DVR'ed it). 

Hulu is going to kill Hulu through fear. They need to man up and show their content providers that the little bit they might lose in first run ad sales can more than be made up by streaming ad sales. NBC can prove this by providing a service that streams only their content. They need to stop trying to keep their content out of our hands and start facilitating the sale of their own product. We want it. We've been demanding it. Now give it to us.