Traditionally, end-user video and film distribution services (movie theaters, TV channels) competed with each other by geography or a unique programming schedule. As a viewer you watched what was on local channels, or you tuned in to one place that was showing the programs you were itching to see. The internet video world is a different animal but, still in its early stages, it remains something of an experimental lab; especially with regard to professional Hollywood content.
Today, there are a lot of sites showing a lot of the same programming. There are few paid memberships or admissions charges. From networks to portals, beyond proprietary skins on Flash video players, there’s not a lot of differentiation. For many, it’s sites competing for similar audiences and similar ad dollars with the same products.
That fragmented market can’t last. The cost structure of hosting and serving video content (beyond YouTube like short clips) seems destined to divide the marketplace into three categories: i. paid on-demand services (iTunes, Netflix Watch Now, etc), ii. Smaller free channels that excel at offering small, exclusive niche programming; and iii. Large portals or portal/syndication services that host content on their own sites and handle syndicated distribution to others as well.
Hulu, the joint venture video site launched for public consumption in March is aiming to represent door number three and just a few months dwelling out in the public domain, they look like they have a viable chance at success.
“Positive prospects” isn’t always how Hulu was described. When News Corp and NBC Universal partnered to launch their own video distribution portal many thought the odd couple partnership amongst two TV rivals would be little more than an expensive joke. These weren’t companies known for building technology. Nor were these companies, or their brethren in traditional media, known for playing well in the sandbox with each other. The pairing seemed so unlikely many began deriding the then unnamed company with the name: “Clown Co.”
In August, the jokes got cruder when the company sold a 10% stake to Private Equity firm Providence Equity Partners. The deal valued them, an unlaunched, non-public company at a billion dollars. “Clown Co. indeed” many thought. But come October when the newly named Hulu site launched to a limited beta audience the views on the joint venture began to change. Much to the surprise of many, the site was well designed. The video player was efficient, even elegant. Most importantly, it worked. The content library wasn’t bad either (though that was the one thing expected). Some started saying it could be a “killer app.”
Throughout the spring, modifications were made, including HD support. More content was added. In a measured way Hulu was scaled up to meet the public in an official launch. In March, the doors opened for all.
At the time, Hulu CEO Jason Kilar explained the company’s model in an interview with Paid Content’s Staci Kramer. He said, “When you’re dealing with digital goods, you don’t have to be tied to one URL.” He also pointed out, Hulu isn’t looking to send traffic from partners like Yahoo back to Hulu’s own site. “Over 100m people go to Yahoo every month; it’s a very important neighborhood to be in. It’s important to provide the user experience within that neighborhood. We’re very happy and financially comfortable with knowing that somebody consuming the full episode of 30 Rock was within Yahoo. … This is about distribution.”
Now, after a few months of quiet, it looks like that distribution model is gearing up. Today, Hulu announced a deal with Viacom’s Comedy Central to host full length episodes of “The Daily Show with Jon Stewart” and “The Colbert Report.” Though not exclusive (the programs will still air on MTV Networks own sites), it’s the first time copyright sensitive Viacom has licensed the material out for full scale distribution. Through Hulu distribution and embedded players, the shows will air on MySpace, AOL, Yahoo and Microsoft’s MSN (along with Hulu’s own portal too). Later this month, PBS programming will be added to the catalog as well.
Bit by bit, Hulu seems to be establishing itself. Bit by bit, Hulu’s raising their profile. Ultimately, key products for TV PC Convergence are missing from the market but that will come to net video services eventually. One day our living rooms will have Internet TV tethers, it’s just a matter of time. In that environment the measurement of a quality content provider may change, but for now, as just an Internet video service, Hulu is definitely “Clown Co” no more.
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