When You Are Your Own Worst Enemy, What’s a Hulu to Do?

Separate articles from both Wired.com and the LA Times over the past two days examine the current state of Hulu and wonder if the popular site will be a victim of its own success. It’s a question we first asked back in March, and given all the recent changes at Hulu, it’s a good time to re-examine it.

Perhaps the best place to start is with the basic disconnect in its mission statement:

Hulu’s mission is to help people find and enjoy the world’s premium video content when, where and how they want it. As we pursue this mission, we aspire to create a service that users, advertisers, and content owners unabashedly love.

The addition of Disney (s DIS) as an owner and content provider certainly helped Hulu grow its content library. And, as Liz wrote, this move gave Hulu a new lease on life by extending its exclusive hold on content from NBC (s GE), FOX (s NWSA) and now ABC for another two years.

But can you build a business around the TV networks’ content while building an audience that is unabashedly in love?

As we’ve said before, Hulu could have every TV show from every network and all that would do is make Hulu beholden to everyone, with little to no leverage. Hulu can only make available what its partners and owners let it. For users, that means a patchwork of content windowing restrictions that limit what can be watched and when. Like House? Good, hope you like it enough to wait eight days after it airs on TV. And after it debuts on Hulu, that episode will pop in and out of existence on the site as FOX forces Hulu to rotate through the House library, doling out a few episodes at a time.

It’s like Hulu has to move at two speeds at one time. It has to move slowly on content availability for the networks so as not to cannibalize TV viewership or DVD sales (however boneheaded that might be), but full steam ahead when it comes to user experience to keep up with an audience that has high expectations.

Because Hulu has created such an attractive, easy-to-use service that people do unabashedly love, it is all the more disappointing to users when that promise goes unfulfilled. The average viewer doesn’t know or care that licensing restrictions mean Hulu can only offer five full episodes of the current season of 30 Rock and no episodes from seasons one or two. The average viewer just gets frustrated that the missing episodes aren’t there. People are used to the networks callously screwing them over, but Hulu? Hulu said it was our friend.

That’s why there was such a hullabaloo when Hulu pulled itself off of Boxee, or blocked international users from sneakily checking out the service through Hotspot Shield.

So if Hulu wants to keep growing and thrive, what should it do?

The good news for Hulu is that it has three of the four major networks as owners. Yes, this means a lot of studio execs barking orders at the company, but it also means that they all have a vested interest in helping Hulu succeed. One of the reasons Disney gave for buying in was Hulu’s ability to attract casual viewers. Hulu’s TV commercial blitz this year has translated into views, and in March, Hulu surpassed Yahoo (s YHOO) to become the No. 3 video site in terms of video streams (more than 380 million), according to comScore.

But Hulu’s mission to make all that premium content available is bound to be stymied as the established industry sees those big audience numbers, panics, and looks to put content from the cable networks behind authentication walls. Comcast (s CMSCA) is aggressively pushing this issue forward with Fancast, and working over time to secure additional rights to content that cable networks have been reluctant to hand over to the free-lovin’ Hulu.

Hulu has started to implement social functionality through tools like Facebook Connect, but rival sites Fancast and TV.com are also upping their social features. The trick to winning there will be to amass the largest active community, something Hulu is off to a strong start with.

The answer probably lies in Hulu itself. Not to sound all schmaltzy, but there is a reason people love the service. The company is truly trying to build something special, and audiences can pick up on that. If Hulu can keep fostering that goodwill and help people understand that this whole watching TV online is new for everybody — the company will be just fine.

Unfortunately, the first one on the beach takes all the bullets, but hopefully none of them will be lethal.