Hulu.com - Now Home of the Big 3

In the original six part series posted here November 12, 2007, the importance of the birth of Hulu.com parented by NBCU and Fox was described. Also noted in that series was the following:

Disney (ABC) CEO Bob Iger was called upon to defend the company's narrow online video distribution at a recent corporate event. After doing a song and dance defense, he described it as an interesting debate, explaining that the original idea of amassing most of the video on ABC.com was to promote the shows, use the site to upsell and "it also became a pretty good platform for advertisers."

He added: "We're going to take a pretty expansive view. .. We're going to be on more places than iTunes, ABC.com and AOL."

This week we've learned that Disney/ABC has become a partner in Hulu.com. I'm hoping this current HULU business model of free access with advertising support works out. But no one should be under no illusion that the free access model is the long term plan.

(For discussion purposes below, my use of the ubiquitous "they" means the large media, cable, and media+cable conglomerates. And I don't mean to imply a "conspiracy against the viewing public" but more a "joint effort to find a corporate economic model in which the existing few can thrive.")

The current HULU system isn't the model under discussion as the long term plan in the media, cable and advertising industry trade press. Apparently the cable companies want access to current programming on media company sites restricted to cable and satellite TV subscribers with some sort of "restricted membership access" model.

They would prefer an IPTV model using Tru2way enabled boxes. The ideal in their mind would be to allow access to "current program" streaming based on your package, so if your cable/satellite package doesn't give you access to the FX channel you can't stream an FX program shown in the past two years.

But they appear to have decided to settle for:

1. access restricted to "cable channel" subscribers through any cable or satellite system; and
2. allowing a PPV internet streaming system while offering "a better way" using set top boxes that recognize the viewer's programming package.

The media companies are sympathetic to the cable companies because at this point the advertising revenue doesn't support the basic on line operation of a site like Hulu.com, much less provide a revenue stream to help pay for the programming and generate a profit.

They envision some type of PPV revenue model for "current TV" and "newer movie" content based on streaming activities, such as 29¢ per episode stream or $1.59 per movie stream with limited advertising, perhaps offering an ad free alternative for an extra $1 per stream or annual subscription.

Content is being aggregated through the media-company-jointly-owned Hulu.com for three of the four major TV broadcast networks, their sister cable channels, and their sister media production and distribution companies (which represents a huge chunk of the media industry). CBS bought TV.com and is restructuring it to accomplish the same purpose as Hulu where, I would guess, we'll see CBS and Viacom content offered, ultimately maybe with Time-Warner and/or Sony.

I have to credit both NBCU (GE) and Fox (News Corp) for moving rapidly to creat an effective web site and experimenting with different outlet approaches. They're in a position to adapt to the economic needs of the cable/telcom-TV/ISP giants, while cleverly threading their way through the regulatory minefield. They haven't tripped and probably will avoid tripping any FCC/SEC/Justice Department mines by licensing content to Apple (which already has a fee structure), the new Google-owned YouTube media site, and Amazon's streaming system as well as the cable-owned web sites like Fancast.

In 2011 as the economic model becomes clearer, they'll make concessions to labor on residuals from internet content revenues. They don't want a protracted labor dispute which could raise antitrust issues.

The ultimate goal is to end up with as few originating sources for PPV video streaming as possible for media-conglomerate-owned content. Then, they'll launch a major attack on the video file-sharing pirates. Beginning in 2012, BitTorrent users may find themselves in a seriously troubling environment.