Blog Post

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

Separate articles from both 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 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.

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

  1. dk jones

    In these tough times, i lost my very good cable deal & have been using not only Hulu, but the network ‘sites as well. Could it be that House is only available to Hulu 8 days after airing on Fox, because Fox is trying to get all the monetization it can from the show by having it on its own site, before it has to share any revenues/viewership w/ its Hulu partners? if you really must see a show ASAP after it airs, go to the network site.

    while i realize Hulu’s partners(content providers) don’t want the site’s content on our TVs, how do they intend to stop us? I have a 17″ iMac connected via DVI>HDMI to my 42″ Sony w/ optical audio to my Sony AVR & use my web browser. the 480p/fullscreen option looks as good as DVD playback. & since i can’t skip or pause the :30 spots scattered through-out a show, it’s not much different than the OTA experience, in fact i’m more likely to watch the spots since :30 isn’t enough time to go to the kitchen & get a beverage re-fill. so why not allow set-top boxes or software(Boxxee/Understudy) to direct feeds to people’s TVs? my mother told me a long time ago when i was a child “locks only keep out honest people.”. surely these partners ought to have learned something from the Naptser P2P era in music & can come up w/ a licensing scheme/arrangement for the Roku/Vudu set-top box makers, maybe .5-1% of the wholesale price of each unit sold. being able to watch the programming on our new HDTV/widescreen TVs would surely improve the public’s viewing experience & most likely increase viewership. & do the same(a licensing agreement) for out of country distribution. it is only a question of when, before this segment of the audience gets factored into the Nielson ratings, if it isn’t already.

  2. I think this is important because the future of online TV is — whether we like it or not — about business relationships. Hulu will succeed if it meets consumer expectations of content availability while fulfilling its business goals. Any operator in the space will need to have powerful and progressive partnerships.

  3. I love watching Hulu, I just wish I could watch it on my TV without buying something new.

    The money that content owners stand to lose if Hulu opens up international views is way too much to let that happen.

    Other than that, I think Hulu is just going to get better and better.

  4. On balance, Hulu is a very compelling model, with premium content, great user interface and advertising model. I agree that as long as the users continue to feel the love for Hulu, it can get around the content limitations.

    However, I suspect Hulu has much bigger challenge with getting on your TV. There are no good models for them to emulate, so Vudu or Roku or VuNow won’t be carrying Hulu anytime soon.

  5. Drew Robertson

    Sorry Chris but part of your piece must have been cut off by my RSS reader. I am sure there is a part explaining how Hulu will convert their adoring fans into revenues. I’ll come back tomorrow. I am sure I can learn how Hulu will monetize the eyeballs of precious, entitled Millennials.