While it’s no secret that Hulu, the online video aggregation site launched in a partnership between FOX and NBC in an effort to keep control of content, has become an online success, its meteoric rise might be working too well for some in the industry. The LA Times reports that in March 2009, a year after its release, Hulu recorded 42 million viewers, a figure that puts the site ahead of both Yahoo! and MSN and situates it as a legitimate threat to YouTube’s throne. A fact that should be reason to celebrate, except that they’re giving their programming away for free.
Though the content is technically commercial driven, none of these dollars go to cable and satellite providers like Time Warner and DirectTV which ordinarily wouldn’t pose a problem, but because of the open access to all content currently being offered, they feel that their subscription model is being undercut. And considering that the money these providers pay to networks to carry their programming is directly funneled back in to fund the creation of these very same shows, they feel they’re at least owed a level of exclusivity out of the deal. A situation that perfectly illustrates the complex series of relationships between networks, cable operators, advertisers and users that need to be navigated by the industry as a whole as it attempts to rethink entertainment in the online age.
The LA Times explains:
Hulu illustrates the quandary that media executives face as they weigh the potential of the Internet against their dependable, old-line businesses. If the television industry does not find a way to preserve its two pillars of revenue — advertising and subscription fees — the consequences could be dire. Analysts point to the rapid deterioration of newspapers, which traded paying print subscribers for the expectation of big bucks from online advertising that have not materialized.
The conflict has forced Hulu to make concessions that have hurt users who have come to expect a rich menu on the video site. In recent months, entire seasons of “It’s Always Sunny in Philadelphia” were abruptly taken off the site, along with episodes of other cable TV shows such as “In Plain Sight” and “Psych.”
As a result, Hulu is looking at ways to preserve their relationship with cable operators without alienating their consumer base, a move that’s easier said than done. One such system would require that users verify that they are paid TV subscribers before being granted access to the site, while another envisions a tiered pricing structure where certain premium content would only be available to cable subscribers. And though the folks behind Hulu are well aware that a similar scenario failed miserably for the newspaper industry, they also feel their situation is unique and are confident that they can integrate a seamless payment model in the future.
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