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Mike Berkley  //  Product Strategy @ Comcast's Social Technology Group. Formerly CEO of SplashCast Media. This is my personal blog. My writing and opinions do not necessarily reflect those of Comcast.

Oct 22 / 8:09pm

Hulu will begin charging for content. Unable to make pure ad model work.

The momentum is definitely turning towards a paid content model for online TV access these days!

More accurately: the momentum is for a hybrid model mixing free (ad supported) and paid content. The reality is that the "Hulu experiment" for NBC and Fox has had mixed results.

Yes, Hulu has been very successful in building a large online audience very quickly (with the help of exclusive primetime TV content deals, a Super Bowl commercial, and tens of millions $ in marketing).

But Hulu has thus far been unable to show an advertising business model that comes close to matching cable / broadcast models. Hulu generates just a third the revenue per viewer episode than traditional TV from advertising. While there are lots of reasons for this, the basic reason is that viewers have a much lower tolerance for TV commercials in a lean-forward (at computer) environment than in a lean-back (living room) environment.

So the "Hulu experiment" will soon be entering a new phase of its life which involves extracting a little flesh from its viewers. We don't yet know how exactly this will be implemented. It is likely going to be different than the cable-industry's TV Everywhere initiative, which requires users to prove (authenticate) they are paying cable subscribers before getting access to certain content.

It might be more similar to Disney's newly announced iTunes-like, pay-per-show model they announced yesterday.

We shall see. But all of this is certainly a sign of the times. Here's the story on Hulu's move to a paid model:

http://mobile.broadcastingcable.com/blog/ADverse_Atkinson_on_Advertising/23941-Chase_Carey_Hulu_to_Charge_in_2010.php?nid=2228&source=title&rid=6454445

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14 comments

Oct 22, 2009
Tom Turnbull said...
Very interesting. What do you think happens to the audience if Hulu charged a $9.99/month subscription fee for access to its content?
Oct 22, 2009
Mike Berkley said...
Uh, buh bye.
Oct 22, 2009
Tom Turnbull said...
Exactly. Seems ill advised.
Oct 22, 2009
Mike Berkley said...
Hulu's in a pickle. They aren't making money w/ pure ad model and its owners are getting antsy, anxious, and... fearful. The prevailing fear is that Hulu has poisoned the "content well" by giving it all away for free, devaluing the product.
Oct 23, 2009
Tom Turnbull said...
Again, not unreasonable for Comcast to think they can go after Hulu.
Oct 23, 2009
Mike Berkley said...
Certainly not unreasonable, but I think misguided. Comcast should partner with Hulu, not compete with Hulu.
Oct 23, 2009
Tom Turnbull said...
"Misguided" means based on error (i.e., unreasonable). Which is it? :)
Oct 23, 2009
Mike Berkley said...
Let's please avoid another semantics debate. You know exactly what I mean.
Oct 23, 2009
Tom Turnbull said...
Competing with Hulu is crazy, but not insane? :)

You are saying that Comcast should focus elsewhere, I take it.

If Hulu is in a "pickle" Comcast should try to take them down.

Oct 23, 2009
Mike Berkley said...
It is not unreasonable for Comcast to want to take down Hulu. But I think it would be a mistake for them to try. That's what I'm saying.

Rather than destroy the audience that Hulu has built, Comcast can effectively take it over and apply it to their own goals.

Oct 23, 2009
Tom Turnbull said...
The "problem" with that is that Comcast doesn't own Hulu. Comcast could create more shareholder value by taking Hulu down and building Fancast up. It's certainly reasonable to try.
Oct 23, 2009
Mike Berkley said...
They don't have to own Hulu. They can do it through partnership to implement TV Everywhere. Helps address Hulu's pickle, and gives Comcast audience and brand power behind TV Everywhere. Big issue to be resolved is that Comcast will ultimately need to charge additional fees for this (paid, in part, back to NBC and Fox via increased carriage fees).

Disney is intent on doing the iTunes "a la cart" thing, so not sure how they view this unfolding.

Oct 23, 2009
Tom Turnbull said...
All could be done via partnership. Comcast doesn't HAVE to own Hulu. Bigger opp for CCW shareholders is to capture more of value chain by owning consumer brand as well. Makes sense to try.
Jul 23, 2010
Din Freebies said...
Competing with Hulu is crazy, but not insane? :)

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