Hulu’s growing pains are emblematic of old media’s challenges and symptomatic of its pedigree.
Hulu is the free premium video site that was launched by News Corp. and NBC and today also includes Disney/ABC as a third parent. A bit of a disclaimer: WatchMojo supplies Hulu with a plethora of videos across multiple categories.
Let’s first look at Hulu’s pedigree to understand why this script ending should not have come as a surprise to anyone.
Too Many Cooks in the Kitchen?
According to Mediaweek: “Observers predict that the already complicated arrangement is likely to become more so, particularly given the prospect that NBC Universal may be sold to Comcast—which already operates its own online video site (Fancast) and has a markedly different philosophy regarding just how free TV content should be on the Internet.”
I’ve always feared that what led to Hulu’s quick ascent - access to great content - would in turn mean that its media owners would eventually bicker and have divergent opinions on strategy. After all, while Google’s YouTube is Big Media’s frienemy, over time, Big Media’s biggest enemies are one another as they vie for market share.
That is half of the equation.
Market Timing Never Works, You Have to Stick to Your Guns
Old Media makes decisions based on today’s conditions, which ensure that in a few years time, when the project has taken off, the conditions might no longer be conducive to their strategy and execution.
Case in point: Hulu decided from Day 1 to go free, this helped the company’s traffic take off: Hulu has soared from 12.5 million unique users in September 2008 to 38.7 million this past September, per comScore.
When the site launched, the decision to go free was smart. After all, the challenge was to change consumer behavior and thwart piracy.
To put things into context, in the summer of 2007, Rupert Murdoch’s News Corp. was seeking to acquire Dow Jones and there was talk of making Dow Jones’ Wall Street Journal website - the most successful paid content website in the world - go free to capture more advertising dollars.
At about the same time, Hulu was moving from an idea to beta to launch. Never was there talk of making consumer play, not because Hulu’s media owners (which included Murdoch’s News Corp.) cared about user preference, but because it was an advertising play.
The Economic Meltdown Changed the Script
With the 2008 economic meltdown came a slowdown in advertising. This slowdown affected traditional media and advertising more than online. As a result, the downward pressure on media companies’ share prices accelerated and this forced them to reconsider the free, ad-supported content model.
Incidentally, there is no more talk of converting WSJ.com into a free site, in fact, Mr. Murdoch today talks of serving less users on his web properties but charging them to access the content.
Yes, times they change.
Hulu is a great partner of ours. We really wish them well. The CPMs they command are so much higher than the industry standard that we wish that they grow as a site so we grow with them. But the story twists we read in the press should come as no surprise because media companies are impatient and desperate.
Have We Seen This Movie?
What they fail to realize, ironically, is that no matter what plan they hatch today to get users to pay, by the time these plans are implemented, the advertising market will return and they will find themselves on the inside of the pay wall looking out, once again finding themselves going against the grain.
Big Champagne CEO Eric Garland:
That means that this year or next year is going to be Hollywood’s year to really start to lose audience–not just at the fringes but in regular middle-American living rooms. They’ll lose them to the other box, to the smart box.
Read more on CNET.
Could it happen? Sure, why not. Markets are looking for a catalyst and if any media company could IPO these days, NBC Universal could be it. See the interview with John Battelle here:
A couple of years ago I asked “how much is NBC worth?”
Bear in mind, this was before the media market meltdown… before online began to eat away at TV’s might… but nonetheless, my valuation pegged NBC at $32 billion.
Today the rumor is that Comcast bought NBC for $35 billion.
Not bad.
I have always maintained that traditional media won’t really die (well…) and that TV advertising probably won’t get surpassed by online ads… but seeing online ads surpass TV ads in the UK I am starting to doubt that.
In fact, I’ve ran numbers using basic growth estimates and the case can be made for both
Online Ads Surpassing TV Ads by 2021
Online Video Surpassing Online Search Ads by 2018
Told you, not crazy…
The sound of ad dollars evaporating:
The US media has lost more than USD10bn in advertising revenue during the first half of 2009, bringing the industry total down to USD56.9bn. Research group Nielsen says this shows a year-on-year decline in US ad revenues of 15.4% - the largest drop in the decade.
Some of the heaviest drops were in newspaper and magazine advertising with national publications declining 22.8% and 21.2% respectively, attributed to the migration of classified advertising to the web. The Newspaper Association of America recently reported that newspapers had suffered a total loss of 30% of ad revenues in Q2 2009 compared to the previous year.
So-called “spot” advertising - scheduled at short notice - fell by 17.4% in the top 100 local TV markets and even internet advertising, from which Nielsen excludes search engine spending, slipped 1%.
Interesting times:
At stake is nothing less than the future of television shows and movies on digital platforms at a time when online viewing is exploding, but still remains a minuscule percentage of overall television viewing.
Read more on FT.com:
Who cares, less and less people are watching TV. But I think this has to do with the intrusiveness of ads as well as their format (on TV it’s a video online it’s usually a banner).
What Ads Do People Ignore?
—46% Internet banner ads
—17% Internet search engine ads
—13% Television ads
—9% Radio ads
—6% Newspaper Ads
What Ads Are Most Helpful?
—37% TV ads
—17% Newspaper ads
—14% Internet search ads
—3% Radio ads
—1% Internet banner ads
LA Times article highlights the backwardsness of traditional media companies’ web video content efforts:
In 2006, Shane Felux was on a makeshift set near his home in northern Virginia producing a Web video when he received an out-of-the-blue phone call from Barry Jossen, who was then executive vice president of production for Disney’s ABC Studios.
“I thought it was some friends of mine screwing around, but my wife said the caller ID read ‘Disney’ and I should take it,” recalled Felux, who was already a minor celebrity on the Web for his “Star Wars” fan film “Revelations,” but had never earned a penny doing it.
So this led Disney executives to think that he could be successful online? Nice.
What was the result, and I quote: “”I could have made more money delivering pizza,” he said.”
Read the LA Times article to lose your lunch here.
I was traveling to and from NYC when the Iranian elections took place (I’m born there, though been out since I was 5).
Anyway, it’s hard not to pay attention to what is going on, regardless of what you think.
So I turn on my TV to see what is going on, check CNN and who is Larry King talking to: Heidi Montag and Spencer Pratt, that’s whom.
Now don’t get me wrong, Larry King and CNN can have whomever they want on and talk about whatever they want… but CNN.com at least covers the story du jour, one that has shaped America’s foreign policy in the Middle East (and thus, practically all over the world) for the past 50 years, dating back to 1953 when they got involved with the Iranian elections and overthrew the politically elected leader to reinstall the US-backed Shah.
Again, regardless of your political views on all of this, you have to wonder: is CNN crazy?
Now that Spencer and Heidi are off… Larry K. cues to… the Jonas Brothers.
PLAY
