Why Jason Kilar Will Leave Hulu

Jason Kilar

The portrait of Hulu that emerged from today’s Wall Street Journal is that of a hopelessly dysfunctional venture at odds with itself over its future direction. If it’s true as reported that CEO Jason Kilar has threatened to exit the company, it’s hard to believe he’s going to stay much longer given how difficult the circumstances are in which he finds himself.

Take your pick as to which of the revelations Kilar should find most dispiriting in WSJ’s devastating account of corporate infighting:

1. “Discussions have included such concerns as whether giving Hulu exclusive content restricts the owners unnecessarily.” The “owners” seem to have already registered their dissatisfaction on this front by making deals with Hulu competitors like Netflix (NSDQ: NFLX) for the same content. That’s understandable given they want to compare how their content will fare comparatively on each platform, but make no mistake: A Hulu without exclusive content has no competitive edge. If the venture’s own owners can’t figure out some slice of the pie should be Hulu’s and Hulu’s alone, they might as well nail an “Out of Business” sign to the homepage.

2. “News Corp (NSDQ: NWS). and Disney (NYSE: DIS) are also each mulling whether to wait two weeks or more after a TV episode airs before making it available free online.” Two weeks is an eternity when it comes to current episodes but how can you blame the content owners? Hulu has so much competition for catch-up viewing in the days immediately after broadcast, between multichannel video on demand and digital video recorders. This also explains why Disney made a deal with Netflix a few months ago for an unprecedented 15-day window for series from ABC and Disney Channel. This must be a test of whether viewers value content weeks after telecast premiere. If it works, this could be even more impactful for Netflix than Hulu.

3. When NBC Universal (NYSE: GE) recently gave new episodes of Saturday Night Live to Netflix, Mr. Kilar complained in a phone call with NBC [CEO Jeff] Zucker. Yet another example of how Netflix’s success has so thoroughly spooked the TV business that even Hulu’s owners will throw the venture under the bus in order not to risk miss jumping on the best bandwagon.

4. “Hulu’s owners are now considering management’s proposal to create a ‘virtual cable operator.'” Get in line behind Microsoft (NSDQ: MSFT), which is reportedly also considering such a strategy. The notion that Hulu could become some kind of bundle of linear and on-demand channels is such a head-scrambler that it’s hard to make of how compelling this could be, let alone if it’s possible. The devil is in the details here; a cheaper, most customizable bundle would be a hit with consumers, but believe that when you see it.

5. “Fox Broadcasting owner News Corp. and ABC owner Disney are contemplating pulling some free content from Hulu.” No clearer evidence needed that Hulu’s original business model is no longer useful to its owners. We’ve already seen how impactful it was when Viacom (NYSE: VIA) yanked Comedy Central hits The Daily Show and The Colbert Report; imagine how embarrassing it will be when ABC or Fox inevitably takes back a primetime hit.

It’s hard not to feel for Kilar. This guy seemed to have pulled off a miracle just a few short years ago by silencing all the naysayers who held that NBC Universal and News Corp. couldn’t possibly join forces to build a compelling digital content play. Kilar did just that, and the kudos that rained his way were well-deserved; Hulu was a triumph of engineering and marketing befitting an executive who saw how to perfect those disciplines from his Amazon (NSDQ: AMZN) days.

But as we’ve seen with MySpace, you can go from media darling to the doghouse brutally quickly. Hulu is in very serious trouble if even half of what is in today’s WSJ is true (and there’s no reason not to believe it 100%).

It must be an agonizing decision to leave behind years of work so painstakingly constructed, and so critically acclaimed (however briefly). But Kilar has clearly lost control of his creation, which gives him little reason to stick around much longer.

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