Hulu May Gain Some Independence — But At What Cost?


Hulu may have a bit more independence soon, as Disney CEO Bob Iger and News Corp. COO Chase Carey could leave its board of directors. The Wall Street Journal reported the two board members might depart, which could make Hulu more nimble and independent of the major media stakeholders. At the same time, since those stakeholders are also Hulu’s primary content providers, more independence is a double-edged sword.

The news comes after reports of disagreements between Hulu CEO Jason Kilar and the major media companies that formed the online video site, and also provide it with the majority of its content. Earlier this year, Kilar defended the company’s business model in an open letter that reportedly enraged his corporate stakeholders and media partners. That led to some speculation that Kilar could be on his way out, although those rumors have subsided in recent weeks. But the departure of media moguls from Hulu’s board means that Kilar might have finally won some of the independence he’s sought since the launch of the joint venture.

That said, even if Iger and Carey depart, Disney and News Corp. could still have a seat at the table. An About page on Hulu listed 12 members on its board of directors, including three seats each for media parents Disney, Fox and NBC Universal, as well as two members from investor Providence Equity Partners and one seat for CEO Jason Kilar. As part of its merger with Comcast’s cable properties, NBC Universal agreed to relinquish its board seats, bringing the total number of board members to nine. But it’s unlikely that Disney and News Corp. would give up their board positions altogether.

Independence might not be all it’s cracked up to be, anyway. Hulu depends on Disney, Fox and NBC for the majority of the broadcast TV content available through the service, and it’s in the process of renegotiating its deals with those companies now. If representatives from those companies are distancing themselves from Hulu’s board, it could also signal that they are not as invested in ensuring Hulu’s future success.

Hulu reported more than $260 million in revenues last year, and expects to double that in 2011. At the same time, that number is tiny when compared to the overall TV ad market. As broadcasters become more concerned about the possibility of Hulu cannibalizing some of their live TV audience, they may look to pull back on the amount of content that is available through the site, or lengthen the time between when shows are available after airing on broadcast TV. A recent deal with Viacom created a three-week window for shows between the day shows appear on the cable network and when they appear on Hulu, and other content partners could follow suit.

While less interference from broadcast partners whose businesses might not be fully aligned with Hulu’s plans is a good thing, allowing it to diversify its content and strike deals with other content providers, less support for the company at the board level might be bad news for Hulu in its content negotiations.


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