Conversation: Hulu CEO on Netflix, Hulu Plus and Broadband


Hulu CEO Jason Kilar has reason to feel pretty pleased. His three-year-old Los Angeles–based company that was given no chance to succeed (by me) has managed to not only become super successful but has also become one of the main stewards of the online video industry. And the company has weathered turbulent times and nervous media companies to finally launch a paid version of its service, Hulu Plus, last week.

“It has been an amazing response, many times the internal projections for beta requests and app store downloads,” Kilar said in an interview about Hulu Plus yesterday.

Devices R Hulu

Hulu Plus is a plan long in the making to take the service beyond the browser into connected devices. Later this month, the company will introduce a version of the service for Sony Playstation 3 and will follow that with support for Samsung’s connected televisions and Blue-ray players, Sony’s Bravia range of televisions and the XBox.

“We are big believers that every device that is connected is an opportunity for us?,” said Kilar. “Premium content should be delivered to these devices?.”

This is a page out of Netflix’s strategy. Just as the DVD-company has figured out that it eventually needs to move away from being prisoner to one screen (television), Kilar knows that Hulu’s future looks at opportunities beyond the web browser. (YouTube, however, is taking a different approach; creating different web browser versions that will work on a variety of devices.)

Hulu, Kilar said, had been working on the Hulu Plus offering since March 2009. The reason it took so long is because the company had to not only overcome technical problems but also work with its partners. Jason’s business philosophy it seems is to learn from experience and grow in a methodical manner. “Everything takes time,” he quipped, pointing to the fact that, while Hulu started with only two content partners, it now has 226 content partners.

While Hulu Plus has been critically acclaimed, the service has come under criticism for charging a $9.99 monthly subscription fee for its ad-supported service. Kilar said that the price was set by Hulu after talking to potential customers. However, if in the future its customers want a higher-priced ad-version of the service, Hulu may offer such a super-premium service. ?

Hulu vs Netflix

Hulu Plus has drawn comparisons with Netflix and its subscription model, which offers a somewhat similar library of streaming content. Kilar dismissed all that talk, pointing to the old television world which has many different business models. Just as you have subscription-only HBO, ad-only broadcast networks and hybrid models such as TNT and TBS, there will be “a diversity of business models” that will be decided upon by content owners and viewers, he said. “There isn’t going to be one single model that will win it all,” he said.

“The living room is too big an opportunity and will attract many competitors. At a macro level, anyone who is in the business of delivering premium content is looking at Hulu as competition, and the list can be very long,” he said.

Kilar argued that the Hulu Plus product — aggregated episodes from current seasons of broadcast shows — is, in fact, differentiated. (Hulu is in effect cutting off the DVD business at the knees by offering the equivalent of DVD box sets before they ever hit the stores.)

“We are the only ones with that service in the market,” Kilar argued, saying that he takes special care as a startup to identify and focus on un-met needs. (Related from GigaOM Pro: Three Reasons Hulu Plus is No Threat to Netflix.)

When I asked Kilar about Apple’s rumored rental video streaming service and how it might put him at a disadvantage, he pointed to his corporate alma mater, Amazon, and its Kindle. Just as the Kindle will survive as a standalone product and an app (aka service) on the iPad, he sees no reason why Hulu can’t live on the iPad and other Apple devices.

“Service providers like us and Netflix are partners to Apple and its iPad,” he said. “We only make the iPad more useful.”

Managing Friendships

So what about Hulu eating into the value proposition of cable companies who are also content aggregators like him?

“The way I see it, service providers are in three businesses — telecom, broadband and paid television,” Kilar said. “In the short term, Hulu will help their business as it is the biggest driver of broadband, a very higher margin business for MSOs.” Even if Hulu Plus is a full alternative to TV, it’s a supplemental service that needs cable companies’ broadband.

But we all know when it comes to large corporations, including cable operators, logic typically goes out the window. I am sure it will be interesting to see how Kilar manages Comcast, the largest cable company in the U.S., which is in the process of buying NBC, a major stakeholder in Hulu. Of course, Kilar’s job description is basically that of a diplomat. The same goes for content owners: “When you put billions of dollars in making content, it is responsible to seek return on the investment,” Kilar said, when I harangued him about his tenuous relationship with corporate parent News Corp and other partners.

“You need to walk in the shoes of your customers to delight them,” Kilar said, adding that viewers, content creators and advertisers are all his customers. It’s good advice that I bet all startups can apply to their business.

Photo by Rodrigo Sepulveda courtesy of DLD Conference via Flickr??

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