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.
I hope you’re wrong here. I would really miss Hulu if it were gone.
That picture of Eliza looks extremely X-rated.
I just posted on the torrent thread I think Hulu should go international. I feel they’re losing a lot of potential revenue by being a U.S only affair. It is the WORLD wide web.
He’s right though, the revenue you make online will never equal the revenue generated on television but Hulu’s existence doesn’t bleed TV viewers, it bleeds BitTorret users. And as long as they can break even on Hulu in the near future, it’s worth keeping around to keep pirating at bay.
Julia, I hope so, too. I STILL miss Kozmo.com and that’s been gone for years. Andrea, it’s right out of the Hulu commercial with Dushku. It airs on TV, it can’t be X-Rated!
http://www.hulu.com/watch/58579/hulu-tv-ads-elizas-a-doll
Hulu will probably have to become a pay-monthly service that also allows users to download shows to their computers and portable devices for a lower cost than iTunes, or no extra cost under a higher-cost plan.
Provide a free service with all the normal amount of commercials; $5 per month plan with limited commercials and discounted downloads; $10 per month with no commercials and discounted downloads; $20 per month with no commercials and unlimited downloads of shows (with DRM); and $30 per month with no commercials and unlimited downloads of shows (without DRM). Non-premium package plans will also be able to download shows, but at cost or decreased cost (depending on plan).
Dave, I responded to your comment on that thread. It’s not about Hulu saying, “screw you, international can’t have our content!” it’s just the way the content is licensed. CBS doesn’t have the rights to stream CSI in XYZ country because when it licensed the international rights the company in XYZ that got it owns those rights.
It seems in most cases it is the international companies buying the content who do not wish to stream it to their own locales. They can’t make any money on the online content, are not as deep-pocketed as the big US networks to suffer the online losses and they want people to watch it on TV where the company who bought the rights knows how to make money.
Haha, I thought the same thing, Andrea! What exactly is she doing there?
I love Hulu, but I can definitely see that it’s not the best business model. If bandwidth/storage cost is such a huge issue, maybe they could cut down on the number of episodes for each show that are up, and maybe cut down on some of the movies, too? And I feel the advertising could be better run, too – sometimes, every single commercial break in the video I watch will be the same exact commercial. Which on the one hand, really gets into my head that I should be using product X, but on the other hand, it gets annoying and it might be time to mix it up a bit.
I guess it’s obvious to most readers but I would edit that line in the first paragraph to read that he said that NBC Universal is now primarily a cable business.
I don’t think Hulu is going away but I think in a relatively short time you will see shows on Hulu carrying either the same number of commercials or literally the same commercials as the same show on television. There’s no logical reason to incentivize people to watch online, where their eyeballs generate less money. It’s not sustainable.
Hulu’s existence doesn’t bleed TV viewers, it bleeds BitTorret users.
I think you are right and wrong. I’m sure it has cut into illegal downloads domestically, but I think it also cuts into TV viewing. I got rid of cable because I was tired of paying for something when I could watch it the next morning for free, legally. I have friends and family members who have done the same thing. Of course, we’re not the norm, but to say it hasn’t cut into any TV viewing is wrong.
Hulu will definitely need to increase the number of commercials. At this point, why even watch it on TV unless you watch for 720p quality?
I really wouldn’t mind longer commercials if it’ll keep Hulu around, honestly. Not *more* commercial breaks, mind, you, but I could put up with 1 or 2 minutes of commercials at a time.
I will miss the Hulu commercials. They are probably the best on TV right now (the ones with Alec Baldwin and Eliza), and I will actually stop what I’m doing to watch their commercials. Which is ironic considering this is all about advertising dollars.
Mikey, good edit. Changed.
I think they need to go to a normal amount of television commercials. They are already providing the convenience of watching any show online, without paying anything. That is the selling point. At this point, everyone is so used to commercials anyway, we can deal with them online too. Then offer a payment plan for those who don’t want commercials.
Jack, they are offering shows that are free over the air. If they charged money no one would pay.
I just love how these guys all think they can put the genie back in the bottle.
I would think that it’s not HULU that is raping television ratings as much as downloading, either legal or illegal. Most people I know use HULU for short term fun, or as the method of last resort if they cannot get their show elsewhere for some reason.
Anyway, turning off the HULU spigot will only open the downloading valve wider. You cannot stop it, so you must find a way to coexist with it. Unfortunately, these guys all think they can stop the ocean from rolling in. They are sort of the Neville Chamberlains of broadcast television.
If they shut down HULU, they will lose the all the benefits without impacting the negatives one iota. I’m sure they have data showing that ratings have gone down even more strongly since HULU’s inception, but taking away HULU will only cause people to find another way to get what HULU was providing. What won’t happen is people rushing back to broadcast programing in droves.
The networks are just doing everything they can to avoid revamping their business model. They just cannot accept that their broadcast product has a much, much smaller value to the consumer than it ever has. The only way to get back the profits they have been losing is to go to cheaper product. Fewer shows costing fewer dollars. More reality (UGH–I hate that), but in the future reality is going to need to diversify, becoming less car-wreck television and more designed entertainment, at least if it is going to still attract the eyeballs it is now.
But, hey, until then, Jeff Zucker can just blame it all on HULU. The longer he does that, the longer he can put off firing Silverman.
Julia, that is really not a very good argument. If people were unwilling to pay for shows, then why are home videos sales so good? Why even sell shows on iTunes? Hulu is the greatest convenience for free television. You get all the shows, without having to wait for them to materialize live, and you get them with limited commercials, and for free. So, you give people even more convenience, no commercials, and the ability to download them to PDAs, and they will pay. After all, they already pay for less.
Jack is right, Julia. People already pay for less than what he is proposing. And DVD sales are an excellent comparison, although I would think adding some extra content to what they are selling, as DVDs do, would help this idea along.
Sorry for so many posts so quickly, but I only post a few times a week, so what the hey.
I’m really surprised that they don’t just try something simple like offering a very cheap service called HULU Prime. Charge dimes (literally) and see what sort of response you get. Offer ad free TV, and then throw in something like deleted scenes or a podcast or something equally cheap, and then see what happens.
That they don’t even try this baffles me. Why ONLY give the stuff away for free? Why not TRY and make some money? You don’t have to suspend the free service, or even alter it in any way. Just offer an extra service for a very, very small fee and see what happens. That data would tell you a lot more about whether or not people are willing to pay than all the marketing surveys on the planet.
You don’t get to own Hulu videos. You are paying for the right to watch something on a website, without any sort of portability. If you are talking about turning Hulu into iTunes, yes, I think people would pay money. But I don’t think enough people would pay merely to watch a show on a website, commercial free or not. You can do that for free on many many websites, without even getting into any illegal downloading.