Speaking at the McGraw Hill Summit, today NBC Universal chief Jeff Zucker was grilled and defended NBC, CNBC (and Jim Cramer). He of course also defended Jay Leno at 10pm citing the need for the model to change or winding up like the Rocky Mountain News (dead) or the Seattle Post-Intelligencer (now online only) newspapers. He also said NBC was primarily a cable business and even listed USA Network as the fifth network along with ABC, CBS, FOX and NBC. As far as USA goes, it was hard to disagree with him.
But it was his commentary on Hulu that perhaps interested me most. Reading between the lines I sensed a lot of conflict. On the one hand Zucker said Hulu was well ahead of schedule and would be an important contributor for years to come. He even modified his excellent sound bite of not wanting to trade analog dollars for digital pennies to "I think we're at digital dimes now." But, but, but, there was also:
"What we've lost in viewers and advertising dollars on the analog side isn't being made up for at all on the digital side. We want to find an economic model that makes sense," said Zucker.
It seems both FOX and NBC will be looking to renegotiate their own content deals with Hulu and the Silicon Alley Insider is worried Hulu isn't a particularly good business, despite being a wonderful consumer service.
I've always been worried about that, too. I love a lot of things about Hulu, and I'm certainly glad it exists. But in the late 1990s, I felt exactly the same way about Kozmo.com. Kozmo.com was a home delivery service that would deliver a wide variety of things ranging from Diet Coke and Kit Kat bars to DVDs (rent or buy), video games, video game consoles and even Palm Pilots. Me: "Uh, yeah, can I get the Madden game, three diet Cokes, your biggest Kit Kat bar and a box of microwave popcorn?"
Then scooter riding hipsters would deliver it directly to your doorstep in less than an hour! I LOVED it! The thing I loved about Kozmo other than the convenience was everything was fairly priced to the point where it seemed like there really was no markup for delivering it. How the heck can they make any money on me I'd wonder whenever I'd utilize the service? And of course the answer turns out to be with that sort of business model, they couldn't!
The point is there are sometimes services that are very great from the perspective of the people using the services, but are lousy businesses. While I believe advertisers will (and already do) prefers Hulu (and TV.com, etc) at a greater rate than advertising on YouTube videos of a guy getting into a squabble with a panhandler in front of the coffee shop, that's mostly a function of TV content just being the better content to advertise on and even online, that doesn't make Hulu a good business. All that bandwidth is very, very expensive and if its owners (NBC and FOX) aren't happy with their content arrangements, and with Zucker saying it's not making up at all for any of the bleeding of broadcast television viewers, I worry Hulu is headed for the same fate as Kozmo.com.
Having a product your customers love is a great thing, but only if you can actually make any money at it.