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Hulu taking over the world? Over Time Warner's dead body!

by April 08, 2009
Tastes like chicken!

Tastes like chicken!

At least I hope.

Hulu is currently in negotiations with Disney. Disney seems to be interested in bringing their content to the online service with a plan to "destroy the world" by melting our brains (according to their current ad campaign) but not without a significant stake in the returns. Namely, they want to but a piece of Hulu. This has got some people worried - especially the cable and satellite companies.

Last month, Time Warner CEO Jeff Bewkes unveiled his "TV Everywhere" plan. This is designed to keep paying cable subscribers from jumping ship to Hulu (or other sources) by allowing them to access their TV programming on a multitude of platforms. Comcast apparently will be testing a similar program this summer. Jeff Bewkes has criticized the Disney/Hulu deal stating that it doesn't make sense to put all their content in one place. Robert Iger, chief executive with The Walt Disney Co. retorted reminding Bewkes that content has been free to access over the air and is ad dependent.

The real problem here is not that Hulu.com is becoming the defacto Internet portal for long-form TV content, but that the cable and satellite providers are so far behind the game. Much like the ostrich that had buried its head in the ground hoping its enemies will go away, cable and satellite providers are looking around and seeing that not only is streaming content viable - but it is being done. On top of that, while people care about HD (and we do), many more care about those $100+ cable bills. As the government spends trillions on bailing out anyone that can convince them that they are a bank, it's hard to overlook any way of cutting your monthly expenses - even if it reduces your picture quality.

One of the complaints I'm hearing from consumers is not that they are so in love with Hulu, but that they just don't trust the current stable of content distributors. TV companies have been notoriously lax about providing features until they absolutely have to (or risk losing customers) and even then, only provide enough to keep people from switching. The "TV Everywhere" and other similar plans sound like a smokescreen to distract consumers for a few more months from switching. It is easy to envision frazzled board members scratching their heads trying to figure this whole Internet thing out and devising plans to give them more time.

Think about what it means for each content provider to provide their content on multiple platforms. At the very least, it means some sort of YouTube or Hulu style webpage and a number of plug-ins or apps for the various devices out there. More than likely, we are looking at a simple webpage that few consumers will ever use. They may (or may not) make their content available as a plug-in for apps like PlayOn where they could protect their content much in the same way as Netflix (requiring a username and password). But if you listen to Bewkes, he's talking mobile and on-demand. Not just some programs but everything just like Hulu and other online sites. This is ambitious at best and will probably require some significant financial investment. Are we really prepared to believe that providers will be willing to do this at no additional cost as he claims?

From a content provider standpoint, it doesn't really matter who distributes your content as long as you are getting paid. If everyone is on Hulu, that's where you want your content to be. They don't care how you access it (free through Hulu or paid through a cable provider) the ads are what makes the money. If you are watching, and you watch the ad, they win. Bewkes' argument that limiting an online presence to one outlet falls flat if that one outlet is free and his alternative is for pay. It's pretty clear which outlet consumers would choose (provided the quality is the same). No, the real motivation here seems to be to limit the ease of consumer's access. If everything is on Hulu, access becomes easy and consumers will be tempted to switch. But if content is spread all over the internet on different dedicated sites, then access will require a little more work (or some sort of other aggregator).

Don't expect cable and satellite providers to play fair. I wouldn't be surprised if things like Comcast's download limits being lifted for streaming their own content. Expect them to place pressure on studios not to sign deals with Hulu or provide their own content online through their own or other websites. Cable and satellite providers have pretty much dominated the distribution market for years ever since over the air fell out of favor. They aren’t going to give up quietly.

Hulu's main problem right now is cash flow. Some have complained that online ad revenue just doesn’t generate as much as traditional commercials. With online ads usually only 15-30 seconds (as least on Hulu) only two or three times during a 30 minute show, this makes sense. What Hulu needs to do is find that perfect medium of number/length of commercials per show that is as long as possible but without being so long that it encourages consumers to skip them. Unlike DVRs or Tivos where skipping is pretty much instantaneous, a streamed show has to rebuffer (usually) when fast forwarded or rewound. How many users these days DVR a show and then start watching a few minutes late so that they can skip the commercials? I've been doing it for years. If Hulu can figure out that sweet spot and, more importantly, they can convince advertisers that they've found it, their ad space could actually be worth more than the competing pay outlets. Maybe then they actually would take over the world.


About the author:
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As Associate Editor at Audioholics, Tom promises to the best of his ability to give each review the same amount of attention, consideration, and thoughtfulness as possible and keep his writings free from undue bias and preconceptions. Any indication, either internally or from another, that bias has entered into his review will be immediately investigated. Substantiation of mistakes or bias will be immediately corrected regardless of personal stake, feelings, or ego.

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