Wednesday, June 03, 2009

Hulu on the Road to Nowhere -- Its Major Media Roots Sowing the Seeds of Its Own Demise

As popular as video destination site Hulu has become (it trails only YouTube), the seeds of its own demise already are being openly sowed.  The cause?  Hulu's own major media roots -- the online service is a joint venture between News Corp., NBC Universal and now Disney.  And, not surprisingly, these content/television companies are bowing to enormous pressure from the cable companies who absolutely do not want to see television content made available for "free" on the Internet.  You see, "free" (really ad-supported) video content transforms cable operators into essentially "dumb" pipes that enable delivery of that content -- and cable operators, who count on cable TV paid subscriptions, simply cannot allow this to happen ...

... although it inevitably will (as I have written several times before).  Not today.  Not tomorrow.   But, sooner than you think.  (For another and even more aggressive perspective from an innovator of Internet TV, click on this link from Dmitry Shapiro, CEO of Veoh).  

This is the supreme cage match between competing IPTV and Internet TV views of the world.  Cable companies (and the major media companies who produce the TV content and depend upon cable carriage fees) hold firmly to the "walled garden" IPTV approach, whereas consumers expect their content to be freely available wherever they want it, and whenever they want it (the Internet TV philosophy).  Note that "freely available" does not mean "free" -- consumers pay for content even in an Internet TV world via ads, subscriptions, and digital pay downloads.

So, back to Hulu.  The company's CEO, Jason Kilar, in a recent interview openly and essentially concedes that the major cable companies are significantly driving his distribution strategy.  In his words, "we believe that Hulu can be a major part of the solution for cable, telco, and satellite companies seeking to offer their pay TV subscribers valuable online benefits."  Read that statement carefully -- in particular, the emphasis on "pay TV subscribers."  That means that Hulu is under significant pressure to limit access only to cable pay TV subscribers as part of their monthly cable bill.  In other words, IPTV!  Kilar goes on to say, "Hulu respects that important economic reality in our content partners' businesses" -- in other words, the symbiotic relationship between content providers and cable operators who pay for carriage of TV programming.

Cable's and the media companies' perspectives are completely understandable -- how can they ignore their current economic realities?

Yet, ultimately, they will have no choice to accept the brave new world dominated by Internet TV.  Consumers will demand it ...

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