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Interview: Jason Kilar, CEO, Hulu: ‘Distribution Business Already Works’

Hulu CEO Jason Kilar and I spoke Tuesday as he was heading into the home stretch towards the launch of portal, with months of intense effort behind him and a different phase about to begin. The JV that many doubted would even get to an official status was announced by News Corp (NYSE: NWS) and NBCU almost exactly a year ago — March 22, to be exact. Now, sometime in the next few hours, the second phase is supposed to go live as a fully public service as long as you live in the U.S. (As I type, the site is closed to prepare for the switch.) Kilar joined the start-up in July, bringing in a mostly new team to take over from the joint task force and overhauling the technology with a focus on user experience and scalability. We talked about the distribution concerns raised in paidContent’s earlier story about the launch, advertising changes and more. Some excerpts after the jump:

Distribution network: Kilar responded to the comments here — not new to him — from an exec at one of Hulu’s distribution partners, who raised concerns about the proprietary player among other things: “I’ve received that feedback and I understand the feedback but I do think that in many ways, and even in your story you mentioned this, which we’re not the only company that feels strongly about the fact that it’s important that we serve the video and that we’re able to innovate quickly. Our whole technical team, almost the entire organization, is focused on innovating very, very fast and that’s the only way we’re able to get to where we are today.” Being served by Hulu means that “all of those environments inherit the improvements every day. What you don’t want to do is cut that connection. … Clearly we have those conversations … The reality is there are going to be a number of companies that want to retain control.”

So what’s the answer? “It’s all about clean architecture.” To Kilar’s way of thinking, “At the end of the day, if you kind of take off all the patina, a lot of this is just simple API calls.” He says that’s why the embedded player has been used nearly 50,000 times on over 6,000 sites. “I don’t mean to discount the fact that in some cases you’re sitting on legacy technology or an existing system there is not work to be done but it is a standard that works very, very well and has worked over 50,000 times in the last 18 weeks.”

Driving traffic: “The one thing that’s important to know is Hulu’s not looking for traffic to be sent to from its relationships with Yahoo and Fancast and MSN.” The goal, says Kilar, is to provide users with a complete experience within those portals. “Over 100 million people go to Yahoo every month; it’s a very important neighborhood to be in. It’s important to provide the user experience within that neighborhood. We’re very happy and financially comfortable with knowing that somebody who’s consuming the full episode of 30 Rock was within Yahoo (NSDQ: YHOO). That;s a great situation for us to be in and we’re very level-minded about that. This is about distribution. A lot of people assume that the whole thing is the destination of Yes, that’s an important paet of our business and yes, I do believe that will grow very rapidly, but in conjunction with that, we want the distribution business to grow as fast because it’s important to be in the neighborhood that people frequent in their daily lives.

The distribution business already works, economically and in terms of the monetization. … I’m a capitalist. In terms of the way the distribution network has been set up, it’s something where we can generate a return for the distribution partner because they generate and have a tremendous amount of traffic on their own and clearly that’s the appeal from a business standpoint. Also, Hulu’s able to generate a return on advertising in that environment…. I think you’re going to see us grow that part of the business very aggressively. When you’re dealing with digital goods, you don’t have to be tied to one URL.”

Viewing data: Kilar isn’t ready yet to share detailed stats but says on day one, the bulk of the views were on distribution sites because’s beta was so small but the number is changing dramatically. He expects it eventually to be about 50-50. As for what they’re watching, earlier in the day it veers to short-form, later turning to long-form. “There’s a healthy amount of long-form content being viewed … that continues to surprise me.”

New features: “The main thing you’ll probably notice instantly is that we’ve got an increased focus on not just television, but also on movies. The navigation is going to offer a lot richer experience if you want to dive into the movies. …. A lot of changes will be rolled out as well. We had over 10,000 pieces of user feedback over the last 18 weeks and we read every email.” One change coming is an option in the delivery of video through Flash Player 9.2 for a bigger video screen to watch feature films. The default screen is 700Kbps (it adjusts between that and 480Kbps). They’ll offer users a 1,000Kbps file size for about 30 feature films. “What that gets you is higher resolution, bigger screen size, and we’re going to be rolling out tonight as well.”

Advertising: Two main changes going live tonight and both involve user choice, something lacking in the beta: 1) Hulu is testing user ad choice “in a minority of cases” where companies have a portfolio of products like cars or beverages. Users would be able to choose minivan or sports car, for instance. 2) Hulu will allow users to opt out of commercials during the show in exchange for watching a full movie trailer in advance. Kilar says all of the advertising is so supposed to be “very similar, if not identical, across the web”. Short-form content comes with overlays; very short shared clips shouldn’t have any advertising.

Stress testing: If you want to stress-test a site, it helps to have owners with more than 200,000 U.S. workers on the payroll. I’ve mentioned before that included employees of GE and News Corp in one of its beta expansions. What I didn’t realize was that it was more than a gesture, it was an effort to stress-test the servers with all of the invites going out midday complete with dynamically generated password. It’s the closest Hulu has come to what may happen after the service goes public early Wednesday. Kilar: “We were very happy with the results in terms of how thew service performed under pressure and the architecture that we chose, so we’re ready. We’re very excited about it. That’s exactly what the technical beta was all about.”

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