Hulu turns a profit, but is it all good news?

Hulu has turned a profit, according to CEO Jason Kilar in a NY Times interview. $100 million in revenue for 2009, in fact, and growing. This is a big milestone for the company that brought streaming TV shows into the mainstream; trying to bridge the gap between the media's financial needs and the consumer's growing dissatisfaction with the advertising model of traditional subscription-based television. 

With the company announcing plans for expansion onto the iPad, one would think that all is well in Hulu-land.  Unfortunately, content providers are complaining about the revenue they are receiving from distribution deals with Hulu, and some providers are backing out altogether. Viacom, one of the biggest content providers, backed out of Hulu citing these complaints, and caused Hulu users to miss out on popular Comedy Central shows like "The Daily Show With Jon Stewart" and "The Colbert Report." 

With these complaints becoming increasingly common, some are pointing to the coming iPad release as a testing ground for a Hulu subscription model. Whereas the company prides itself on offering free content supported by ads, Boxee CEO Avner Ronen thinks that Hulu needs to step out of their box a little.  

"A one-size-fits-all business model is very difficult to pull off. Media companies are much more savvy now about those deals. Everyone realizes now that free ad-supported content is not the exclusive model of the future; it’s just one part of it.”

Kilar, the man who brought the free-with-ads model to mainstream digital distribution, is surpringly easy-going about the idea of a subscription-based service.  

“Our mission is to help people discover the world’s premium content, and we believe that subscriptions can help to unlock some of that, including sports and movies and premium cable shows[.] We’re certainly open to subscriptions as a complement to an ad-supported model.”

Of the many hurdles Hulu has yet to overcome in the digital distribution business, a subscription-based approach combined with an expansion onto the iPad may be just the thing to make both users and providers happy with the service. 

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"$100 million in revenue for 2009, in fact, and growing."

Revenue isn't profit. I guess they're intentionally not giving that number.

Forensis said,
"$100 million in revenue for 2009, in fact, and growing."

Revenue isn't profit. I guess they're intentionally not giving that number.


+1

Another +1.

Hulu operates on a rev-share model. Their content expenses scale linearly with revenues. If you can't make a profit on rev-share, then you don't deserve to be in business.

Now that the content providers have figured out that they're handing Hulu free money, things will get more ... interesting. That, plus the acquisition.

The TV stations should be happy to get anything at all from Hulu - Bittorrent continues to provide a superior alternative as far a watching TV goes.

If anything, I think content providers should see Hulu as a landmark stone in forging the way with ad-based content or content delivered without an already established payment model (subscriptions or pay-as-you-go types). Many of the original content providers' websites could be raking in this money directly if their sites were half as navigable and well-functioning/designed as Hulu's.

Around the same time I began using Hulu, many providers like ABC and NBC were also offering high-quality, well-designed streaming videos of their own content. Unfortunately, how to manage that content and distribute it is lost on them, which is why Hulu continues to reign king in this market. ABC Family is now asking pre-teen and teen users to pay $0.99 simply to WATCH an episode. REALLY? They can't be serious, I thought; clearly they have no idea about their teen market.

It's as if the content providers do not even know who their audiences are, which is also probably directly related to how well their advertisement revenue share with Hulu is doing! If they don't know who their market is, how they can expect young people to fork over money for subscriptions is beyond me.

Hulu turning a profit is good news for us, I hope: it is proof that ads do work when you've got your site in order and content that people want to watch. If Hulu heads down the subscription path, there might be a unique surge in viewers returning to the original media content providers' sites such as ABC, NBC, CBS, etc. in the USA, but that will also quickly die as those content providers are ill-equipped to handle the volumes and clueless about content management (especially CBS and NBC) for streaming.

Why are we going backwards? In 1996 I could record shows off "regular" television broadcasts with a VCR and watch it after school. Free. In 2010, trying to get the same level of ease out of content with ads is like pulling teeth.

I hope Hulu hangs in there, we need to get content providers on the right path and Hulu is as best a role model as they can get it seems.

You're right about everything bar two things - they -absolutely- know their teen market! Most teens will go "oh it's only a buck" and the parents will just go "oh okay it's only a buck" and if they keep asking to watch more episodes, the parents will probably limit it to only 3 or so episodes - which is still 3 bucks. Multiply that by the amount of teens and tweens that do this... and yeah, easy revenue. Plus, it gives incentives to make the parents get the DVD if their kid keeps on watching these episodes as it'll be a one off payment for them, but a bolster in revenue for ABC.

As for the VCR thing... surely a hard drive recorder will do the same thing? Or don't you guys have those in the states?

nonick said,
they didn't bring **** to the mainstream, when it only works in USA.. and the whole world left out..

Thank the providers for that. It is absolutely not Hulu's fault.

pickypg said,

Thank the providers for that. It is absolutely not Hulu's fault.

Doesn't really matter, I am not against Hulu, I am against that particular sentence.

nonick said,
Doesn't really matter, I am not against Hulu, I am against that particular sentence.

Sorry, but if something is exclusive to one particular country and the term "mainstream" is thrown around, surely one would gather that it means mainstream in that country. It's not rocket science, bud. Nothing to get all butthurt over.

nonick said,
they didn't bring **** to the mainstream, when it only works in USA.. and the whole world left out..

Something doesn't have to be international to be considered mainstream. In fact, most examples of mainstream that I can think up are cultural things, which would naturally be unique to specific parts of the world. Mainstream music, mainstream media, mainstream toys and video games--these are things that are considered successful and mainstream whether they cross borders or not (Japanese pop culture, for example, is loaded with 'mainstream' products and services that your average Earthling will simply never hear about).

Jason Killer said,
Our mission is to help people discover the world’s premium content
Surely this is what you should be complaining about in terms of Hulu not being 'international'.

duneworld said,
Surely this is what you should be complaining about in terms of Hulu not being 'international'.

Hardly that either. Surely, it's very possible that Hulu may be looking to open their doors to other countries, one step at a time. Just because they don't deliver on that currently doesn't mean it's not a long term goal.

@nonick, you're being childish. There is absolutely no reason to get all upset over a line of text, when everyone else clearly understands the intended message here. Sure, some people make the mistake of thinking only of their country, but this isn't one of those times.

nonick said,
they didn't bring **** to the mainstream, when it only works in USA.. and the whole world left out..

For "most" people :
Texas > USA > Rest of the World.

Viacom is becoming the scourge of the television/music market. Just like TimeWarner is to the ISP market.

Recon415 said,
Viacom is becoming the scourge of the television/music market. Just like TimeWarner is to the ISP market.

I was thinking the same thing. First, they try to entrap YouTube, and now they aren't satisfied with the money coming from Hulu.

I never pirate things but Viacom has to realize that simply because they choose not to play on Hulu, does not mean that I will now go buy their stuff. I'd imagine that there are a fair number of people just like me, and many more that will simply pirate Viacom's stuff in place of watching it on Hulu, which sure sounds like a loss in revenue to me.

To play devil's advocate, it is possible that Hulu is raking in the money while stiffing the providers. But, considering Viacom's track record, I have my doubts.

As for a subscription: I can justify a subscription to Netflix because I often times receive mail from them, and I am paying for ad free bandwidth. However, Hulu will never mail me anything, and I bet I watch enough shows on Hulu to beat out a $5 per month fee (about the amount I'd pay). While I may be in the minority, I am helped by not having an actual cable/satellite box to watch TV with, so I "limit" myself to Hulu.

I think where these companies are trying to take Hulu is Hulu will become a service, just like the Comcast's of the world, but in addition to paying for access to Hulu, you will also get to enjoy ads, with the likely end-game of Hulu giving the providers a slice of both pies. The obvious difference there is that we already pay for access--an internet connection.

I can say that I will definitely not pay a subscription fee for Hulu, and watch commercials. Unfortunately, I fear that I may be in the minority willing to stick to that.

Solid Knight said,
Merge with Netflix.

I could see that being an option, both have excellent offerings.

However, I absolutely would NOT pay for a subscription to Hulu without some sort of guarantee on bandwidth. While I love the service and watch it daily, constantly having to pause for shows to buffer gets old fast. I never have those issues with Netflix.

Edited by SkinAddict, Apr 1 2010, 8:32pm :

vaximily said,

However, I absolutely would NOT pay for a subscription to Hulu without some sort of guarantee on bandwidth. While I love the service and watch it daily, constantly having to pause for shows to buffer gets old fast. I never have those issues with Netflix.

What's your connection speed? I watch Hulu at the highest quality and only ever have to pause for buffering if I have downloads running at high speeds while trying to watch something on Hulu.....if I do not have anything going I never have to wait for buffering.