Prediction: You will not be paying for Hulu any time soon

Categories: Internet TV

Written By

June 4th, 2009

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There has been a lot of noise in the last 24 hours generated by comments from News Corp's (one investor in Hulu) new head of  digital Jonathan Miller, who echoed recent comments from NBC Universal (also an investor in Hulu) chief Zucker as well as executives at Time Warner about charging for online video.

I doubt anyone will be paying for Hulu anytime soon.  By soon I mean in the next 6 months to one year.   First, building a good billing and authentication system is a more difficult task than delivering video.  Moreover, I see zero chance that they will charge people who are already paying for the content, and on a guess Hulu's current viewing is overwhelmingly made up of people who are already paying for content.

The issue of charging for content will be one of necessity, but only for those people who are not already paying for it. This is particularly pronounced for the advertising supported basic cable networks.  The business model there is pretty simple: there are two revenue streams: advertising, and subscription fees.  If you subscribe to cable and get networks like USA and SciFi,  NBC Universal (which owns both of those networks) gets a piece of your monthly cable bill.  Same for ESPN, MTV, etc.

There is absolutely zero incentive to give that content away for people who are not subscribers, since subscriber fees are a big part of the business model.  But, there's not really much incentive to begin charging people who are already paying and again, I believe that winds up being most people.

In fact, how quickly they get around to charging the non subscribers for content is likely a function of the current mix.  If 95% of people watching Burn Notice on Hulu are already paying their cable or satellite provider to receive USA Network, there's probably not any real urgency for Hulu to change things.  But if only 80% are already paying, the urgency ratchets up.  Obviously, the lower the percentage of Hulu users who are already paying for most of the content, the more urgent it gets.

But I don't envision any scenario coming down the pike where as a paying cable subscriber you will have to pay again to view the content online.  But the people who are cutting the cord and turning to the Internet to get their content rather than paying a cable or satellite provider won't get their free lunch forever.

One thing Hulu and others need to figure out though is how to generate as much advertising revenue online as they do on television.  If the answer is "we'll make up the difference by charging you for it even though you're already paying!" the services are doomed to fail anyway.  Though I do think it is possible that the cable and satellite providers could begin charging some small monthly fee for unlimited online viewing (that would mostly go back to the content providers), that doesn't seem likely in the near-term either.

 
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