Watch Out, Hulu: Big Media Getting Ready to Eat its Young

Hollywood and the major record labels have always enjoyed a love-hate relationship with new media, alternating between roses and lawsuits for online entrepreneurs, if you will. Lately, it was looking a little like love was going to win. Hulu, after all, had convinced its detractors that even big dinosaurs can get things right, and record labels had started to embrace services like MySpace Music and But like an alcoholic that just can’t resist that drink, big media looks ready to relapse.

There’s been a lot of bad news out of the so-called Music 2.0 space this week, with Imeem said to be in financial trouble, and forcing some of its subscribers to cough up around $4 per month. There’s also a storm brewing in the online video world, where some networks have started to take their most valuable content offline in order to maximize traditional revenue, and platforms like Hulu are being forced to fight any attempt to bring online content to the living room.

Record labels used to be something like the suicidal canary in the coal mine for Hollywood, eagerly moving from one life-threatening disaster to another. Big music tried to shut down Napster and its successors, only to make them stronger and much more popular in the process. The labels sued tens of thousands of file-sharers and in turn alienated a whole generation of would-be consumers.

Lately, however, it seemed like the music industry had finally come to its senses. Labels had forged relationships with ad-supported services like MySpace Music, and Imeem, and even licensed YouTube to become something of a celestial video jukebox. Unfortunately, the honeymoon didn’t last very long. Warner’s deal with YouTube fell apart late last year, and the site has started to clear its site off all Warner Music tunes, taking down thousands of fair use videos in the process.

There were also reports this week that San Francisco-based streaming music startup Imeem is in the red with the labels because of previously negotiated royalty rates. The company told VentureBeat that it owes the labels “in the single-digit millions,” and MediaMemo reported that it was able to renegotiate how much it has to pay per song streamed with some of the big labels to avoid going under, but the crisis seems far from over. The irony of it all, of course, is that Imeem is partially owned by the major labels.

Then there’s The CBS-owned streaming music site surprised its international (read: outside of the U.S., UK and Germany) audience this week with the announcement that they will have to pay 3 euros (about $4) per month to keep the music coming. also killed off third-party mobile clients, vaguely referring to “licensing agreements.” The reason for this is obvious: Record labels want to sell downloads, not deliver ad-free streams, to mobile users.

The music industry isn’t the only one getting ready to kill off its young. Networks have increasingly been removing content from and their own web sites. It’s Always Sunny in Philadelphia episodes disappeared in January from Hulu, and shows like The Mentalist and Big Bang Theory were removed without warning from the CBS web site last fall. Finally, there’s the continuing spat between Hulu and Boxee, with rights holders pulling the strings to block any attempt to watch their content on TV-connected devices.

And things are gonna get worse, thanks to the fear of losing ad revenue in times of declining ad budgets, according to Forrester analyst JamesMcQuivey. “We expect this situation to intensify throughout the first half of 2009, resulting in bolder content restrictions on the part of content owners and more doubt cast on the role of online TV show aggregators,” he writes in a new report titled “Preparing For The Coming Online TV Backlash” that Forrester is sharing freely with registered users.

McQuivey isn’t the only one pessimistic about big media’s response to the recession. Liz noted on Friday that Hulu risks losing support from NBC and Fox, and another report just suggested that “Online video (is) not commercially viable.”

In fact, platforms like Hulu could soon find themselves in a situation similar to their musical counterparts Imeem and Hulu has shown some phenomenal growth, just like streaming music platforms, but all those public service ads we’ve been seeing lately seem to suggest that their ad inventory isn’t keeping up with that. Which means we could very well see Hulu and its online competition left in the cold while big media retrenches to oldteevee.

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