The Hullabaloo over Hulu

A couple of years ago the buzz along Sand Hill Road was they’d fund any company like YouTube that had a sensible business model. Google didn’t seem concerned with that and purchased YouTube for U$D 1.65B. Since then, other companies and web portals of established studios and networks have made websites where people can view television or movie content from the comfort(??) of their own PC. Network sites like Comedy Central and NBC offer their own content while others like Joost follow the YouTube model, listing viral videos as well as content from top tier studios. Hulu takes a different tack, focusing on premium video and movie content from notable studios like Fox, MGM and NBC to name a few. The question on many people’s minds is whether a premium portal like Hulu will overtake the likes of YouTube, or if other types of video portals will evolve beyond these current enterprises.

Two principal problems exist in the internet media distribution game: monetization and control. Studios and networks want to make money from their content and want to make sure it isn’t being stolen. That’s why Viacom sued YouTube for U$D 1B over copyright infringement. For the most part, content providers are getting sites to cooperate and protect their property, so the next challenge is to figure out how to make money. Hence the commercials leading or following the programming you watch. This is common with content portals and so it is with Hulu. Joost and YouTube don’t embed, but set ads aside the content, not unlike margin layouts common on most websites. There are also tradeoffs with content quality. Content provider material seems higher quality; Hulu even offers HD quality content. On the other hand, content distributors seem to offer lower quality product. The variety in distribution models plus the different varieties of video content seem to differentiate the video portals, so now the question is: who’s got the better mousetrap?

If we turn our attention to internet video viewers we need to understand which demographics are watching which content and by what means. Unlike old school movie and television audiences who sit in front of their respective big screens, internet viewers can also see programming from their PCs, phones, gaming consoles or MP3 players. Being small, these devices don’t need high quality resolution, so network sites don’t have an advantage. On the other hand, users of these portable devices may be more distracted and it is unclear which, if any, advertising mechanism would be more effective in this environment. Additionally, the entire point may be moot if users don’t use their portable devices to watch video and return to big screen media. This is possible since virtually all video and movie content is designed for large screen devices.

What is irrefutable is the reach and interest that internet content can gather. A feature of Google’s purchase of YouTube is the 45 million viewers that watch the site each day. The number is a sizeable share in any market. Add in the international appeal and you realize a properly run portal is a goldmine for its operator. Equally obvious are the numerous complexities in terms of content, viewership demographics and issues of viewer capture (for advertising) that must be sorted out to create a successful product. While some may argue content producers have the upper hand, the distribution and packaging challenges must also be solved to leverage users’ ability to pick and choose their content whenever they want and wherever they want it.