Hulu may be one of the most-watched online video services in the United States, but the service faces tough competition from the likes of Netflix, Blockbuster, Amazon Video-on-Demand, and iTunes, not to mention on-demand offerings from cable companies. And according to The Wall Street Journal, Hulu’s founders haven’t been able to agree whether offering first-run television content for free is helping or hurting their business models. The result might be that some of Hulu’s owners may curtail the amount of free content they make available through the service, with Fox, Disney, and NBC Universal apparently leading the way.
The basic disagreement seems to be how the studios can make the most money from offering their content online. Hulu offers some content for free in an ad-supported form, but studios are concerned the free availability of that content erodes the content’s value in other media, whether that be subscriber-based or one-at-a-time sales and rentals through services like Netflix and iTunes, or in their ability to sell distribution rights to cable companies’ on-demand services. Hulu’s owners are also apparently disagreeing about how advertising sales are being handled on the service.
According to The Wall Street Journal, there’s even been talk of converting Hulu into a online cable service available only to subscribers. With some 20 million people apparently willing to pay every month for Netflix streaming, the days of free ad-supported online video services may be numbered.
NBC, ABC, and Fox launched Hulu back in 2008 primarily as a way to compete with Google’s YouTube online video sharing service and peer-to-peer piracy, and was the first online service to prove that traditional media companies could compete in the online video arena. By any measure, Hulu has been a success, although it’s subscription-based offers don’t seem to have resonated deeply with TV and movie fans.
If NBC Universal were to pull free content from Hulu, it may raise eyebrows amongst regulators and amongst consumer advocates. One of the only conditions imposed on the Comcast/NBC merger by the FCC would be that Comcast surrender NBC’s managerial role in Hulu, because regulators were concerned Comcast would use its influence to benefit its cable business and play hardball with competitors.