In 2007, when I first heard about Hulu, it was not-so-lovingly labelled ClownCo by Google insiders and many of my colleagues in the technology blogging world. I mocked the company and even created a NewCo wreck watch countdown clock before the ClownCo went down in flames. Along came Jason Kilar and boy did he make me eat crow — a well charred crow on top of that. And he did it the old fashioned way: he treated the most convoluted of corporate structures like a startup that was liberally funded by Providence Equity Partners.
Kilar had spent a lot of time next to Amazon’s maverick CEO Jeff Bezos and he learned well from the master of disruption. Like Bezos, he focused on playing the long game and ignored the naysayers.
He used his rolodex to hire the right people. He went to China and acquired a piece of technology to roll out Hulu to the masses at a breakneck speed. Most importantly, the team at Hulu built a simple, elegant and easy to use a minimalistic service: which no one expected. It was so good and I was so wrong. And glad I was, for when I was recovering from my illness in 2008, Hulu became a constant bedside companion.
There are some in Silicon Valley who ask me why I am a fan of Kilar. Here is why:
- Hollywood is about profit maximization even at the expense of paying public.
- Silicon Valley is about building a great consumer experience and build profits in the long term. Google and Amazon are two perfect examples.
Jason was able to marry both those constituencies. Don’t believe me? Just look at the site’s financial performance: at the end of 2012 it had three million Hulu plus subscribers and about $695 million in revenue. The number of paying subscribers for Hulu Japan tripled in comparison to 2011.
With so much good news, it perhaps was the right time for Kilar to announce that he is going to be leaving the company sometime during the first quarter of 2013. It is not as big a shock for his departure has been rumored for a while, especially since the company’s big media owners recently completed a buyout of co-owner Providence Equity. Hulu’s co-owners including Comcast’s NBCUniversal, Disney and News Corp., have been plotting the future without Kilar.
Many of my sources have told me that Kilar was more like a UN peacemaker and trying to organize board meetings with the media-doyens was a nightmare. A Fast Company profile last year pointed out that Kilar had skills to manage up. But things went progressively south after the exit of Peter Chernin, the News Corp. COO who was the heavy on the board and who loved the concept of Hulu. That Kilar survived and helped turn Hulu into a business that 3-million people want to pay for is a testimony to his (and his team’s) skills.
My initial skepticism of this big consortium came from years of observing such beasts of burden trample over saplings of innovation, mostly because the new way threatened their established business practices. At the turn of the century, a Silicon Valley company called @Home Networks had a bold idea: send broadband via cables owned by cable networks. The idea was backed by the likes of John Doerr and soon all big cable companies such as Tele-Communications Inc. (later acquired by AT&T, which was in turn gulped by Comcast) became investors in @Home Networks.
While @Home suffered from adult management, it was the cable companies which essentially killed the pioneer. Once they learned that they could buffer their profits by selling broadband, they proceeded to kill the baby they had helped birth.
Show must go on
Having seen that movie before, I knew that Hulu would have similar problems. With Jason gone and private equity investors having locked in their profits, get ready for the egotistical media companies get their evil way with Hulu.
Kilar will leave Hulu at an interesting juncture. The rise of multiscreen households has turned the video business on its head. The relevance of the older media distribution channels is on the wane and we are transitioning to broadband and web. Think about it this way: world’s biggest live event didn’t happen on ESPN, Fox or NBC. Instead it was YouTube that hosted the Felix Baumgartner’s space jump. South Korean pop star Psy has had a billion views on YouTube. I bet you the top 100 artists have not received that kind of attention on MTV.
The fact is that we are looking at a world where Netflix and Amazon Prime along with YouTube are the cynosure of attention when it comes to video. Hulu has it for now, but its big media owners have their legacy businesses to protect. They need to make the TV station owners happy. They need to fleece the cable customers by selling them packages no one wants.
Hulu was their bridge to the future — but large media companies suffer from a weird kind of astigmatism. They are businesses set up to serve other businesses — movie theaters, cable companies, satellite companies, DVD sellers and now on-demand video providers. That is why they can’t put viewers first, even if they want to.
Too bad, Kilar isn’t going to be there to look out for viewing public.