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Networks & Their Fear & Loathing of Hulu

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Hulu, the online video joint venture of NBC, Fox and Disney that’s funded by Providence Equity Partners, seems to be having familial issues. No, it’s not YouTube or TV Everywhere giving the second-most popular online video service in the U.S. headaches. Instead, internal bickering is causing problems, MediaWeek reports. This is not the first time Hulu’s parents have undermined the service. But it comes as a surprise — traditional media companies have a long history of snatching defeat from the jaws of victory.

Network officials are complaining about Hulu’s sales staff selling against the network’s own sales teams, according to MediaWeek:

“It’s confusing and conflicting, and very muddled,” said Lisa Herdman, vp, director of national programming for RPA, who handles Honda’s online media. Most stop short of accusing Hulu of outright deception but report that its sellers are often not forthcoming about what they can and cannot sell…On the flip side, buyers say that broadcast networks are inconsistent when it comes to selling Hulu avails. “There are a lot of growing pains with the whole scenario,” said Jeff Ratner, digital director, North America, Mindshare Interaction/Maxus. “Hulu has created a legitimate marketplace for online video. Now you are seeing the downside.”

Hulu has succeeded beyond everyone’s expectations, including those of the networks, which three years ago panicked over the rise of YouTube (and Google.) Despite being a big critic of the joint venture — such ventures almost never work out — I eventually changed my mind and ate crow: Hulu is brilliant. In September, 583 million videos were watched on Hulu, making it the second-largest video destination behind YouTube.

The simplicity of its interface and ease of use have made it the darling of American TV fans. If YouTube became an obvious destination to watch video shorts online, Hulu set a standard for the quality of professionally produced video streams. Even Quincy Smith, outgoing CEO of CBS Interactive, who has in the past questioned Hulu’s business model, admits the “service is freakin’ bad-ass and [Hulu CEO] Jason [Kilar] is an extremely great product guy, GM and a guy who can sell.”

Agreed! Kilar has done a good job of delivering a killer product, despite the competing egos and agendas at various networks. But I wonder if Kilar can really keep this whole thing going. Smith, his bombastic views on Hulu aside, is not wrong in his skepticism of the joint venture. During his on-stage conversation with me at our third NewTeeVee Live conference last week, Smith said, “Hulu got extremely successful extremely early, and that might ultimately hurt them.”

“Before you go putting [your content online] in full episodes, you gotta take it to the audience and make sure they know that it’s on this screen,” he said, referring to the need to encourage viewers to watch broadcast television.

Hulu’s owners are pushing the service around “by imposing delayed windows on certain content and allowing just a limited number of episodes available at any given time” — or charging subscription fees. These are Band-Aids. (Related content from GigaOM Pro: “Hulu and the end of Free TV”)

The networks are fighting a losing battle. Why? Because Hulu is only a signpost of things to come. Like YouTube, Hulu is showing the media buyers that there is a smarter, targeted and metric-based approach to buying media on behalf of customers. This is a long-term cyclical shift, and the TV networks will continue to bleed, Hulu or not.

TV advertising has (and continues to be) successful for mass marketing efforts, but even the idea of mass market is going through a big shift. The TV audiences will continue to get divided and subdivided into various niches. Furthermore, the rise of “TV Everywhere,” a way for you to watch cable company-provided video content on the web, is going to eat into the mass market. If the mass market continues to shrivel, then networks will be fighting to get a piece of the shrinking pie. It is no surprise then that the media companies are bickering with their own spawn.

(Related Research: The Ultimate Guide to TV Everywhere, subscription required. Sign up for GigaOM Pro for $79 a year subscription which gives you access for unlimited research.)

5 Responses to “Networks & Their Fear & Loathing of Hulu”

  1. Could HULU collapse under the wieght of its rapid sucess? Won’t be the first time this has happened. Seems like the familiar players of Greed, short-sightedness, corruption and traditional marketing could all help play a part in the outcome. Hmmmm, Interesting- either way, video in the online market place is changing our whole world. Lets hope the good players emerge and take control, this time.

    Deb DiBiasie
    Boston, MA