Hulu won't be clowned by iTunes

SAN FRANCISCO--Hulu CEO Jason Kilar readily acknowledges that digital movie sales from sites such as iTunes mean higher profit margins for Hollywood studios than ad-supported sites can deliver.

But Kilar defended ad-supported services like YouTube and Hulu--formed by News Corp., and NBC Universal--by pointing out that they can draw from a much larger market. Film sales account for $20 billion annually, while ad-supported revenue is $80 billion, Kilar said during his keynote address at the NewTeeVee Live conference on Thursday.

Kilar was responding to comments made by Tom Adams, who operates Adams Media Research, an entertainment industry research and consulting firm. In an interview with CNET News, Adams argued that pay movie services will always be more welcome in Hollywood than ad-supported rivals.

The reason for this, according to Adams, is movie sales and rentals typically enable Hollywood to pocket more cash per viewing than it gets from ad-supported distribution.

Kilar concedes this, but says the market for ad-supported TV shows and films is so much deeper, that even if Hulu is less profitable on a per-viewing business, it still could conceivably generate more revenue for content owners. To snatch more of these ad dollars, Hulu's plan is to make the site a more effective advertising platform than other ad formats.

Jason Kilar

(Credit: Hulu.com)

"Hulu is a very simple business model," Kilar said after his speech. "We believe that if we provide an advertising service that has higher brand recall, higher purchase intent (from users)...relative to billboards, radio and newspapers, advertisers will respond to that. And they are. That's why they are paying premium for ad spots on a higher cost per thousand (CPM) relative to other environments."

Adams also asserted that Internet users won't tolerate the same number of ads online as they do from traditional TV. Hulu posts four times fewer ads into its films and TV shows as television broadcasters and Adams suggested that visitors aren't tolerating more.

"(Adams) made it sound like we tested more ads and they didn't work," Kilar said. "We haven't done anything different than what we're doing now. It's always been two minutes of ads for every 22 minutes of content."

In its first year in business, Hulu has surpassed almost everybody's expectations, certainly Google's. Execs at YouTube's parent company at one time referred to Hulu as "The Clown Company." The joke turned out to be on them.

Hulu has become a force when it comes to offering full-length movies and TV shows. Kilar won't share data on revenue or user adoption, but did say Hulu now sees 12 million monthly visitors and serves 145 million monthly streams. Among Hulu's biggest accolades is that YouTube has followed it into offering full-length TV shows and feature films.

[karpenterskids]

Strangely enough...I was watching one of my favorite TV shows on Hulu, just as this article popped into my RSS feed. :)

[toosday]

@karpenterskids:
Yeah, me too!

Also, I forgot that Google referred to Hulu as Clown Co.

Also, also, as soon as Flash comes to the iPhone or iPod Touch, then it'd be a happy day for me, since Hulu is Flash-based. I don't buy TV shows from iTunes very much to begin with, but that'd be an even bigger incentive for me not to start. I'd rather pay for TV in 2 minutes of my time than directly out-of-pocket.

Hulu does a really good job with their ads by not making them annoying. For me, the more ads I watch during a commercial break (as on television), the less likely I am to remember what was advertised. Also, the instant gratification works well for me. I happened to be watching something on Hulu the other night when a Hyatt ad played. It also just happened to time right when I needed to find accommodations for my trip. I bookmarked the website and made a reservation a day later. Television doesn't have this benefit... yet.

:)

[ibeetle]

As long as Hulu does not get greedy then yes Jason Kilar has a point.

With their success if Hulu starts adding more and more ads to the point that Hulu looks like a typical television station people will delete the bookmark from their browsers.

It will be intersting to see what roll Hulu has in moving from the small screen to the big. Netflix, Apple TV, Playstation 3, XBox 360, Tivo(w/Amazon/Netflix) all have video offerings on that nice new 34 inch high definition in the living room. If Hulu doesn't move to that television it will be forgotten.

Now that Netflix has partnered with (primarily) XBox and Tivo; Hulu need to be falling over themselves to strike a deal with either Sony or Apple or, at the very least a third party box maker like Netflix did with Roku.

Apple is not the enemy. The real competitor is Netflix (along with the XBox or Tivo).

[gefitz]

My Dell Inspriron has an HDMI-Out...I cannot imagine that it will be too much longer before most computers/laptops offer this, if a low-end Dell can do it...

So, Hulu is there on your TV if you want it....and Hulu didn't even have to do anything to get there!

[Mystakill]

Check out MediaMall's PlayOn Server (http://www.themediamall.com/playon), with which you can view streams from Hulu, YouTube, ESPN, and others to your Xbox 360 or PS3. Currently in free beta, but will be $30 once it's released. TVersity may also be another option, but I haven't used it in awhile due to lack of worthwhile updates.

[Galaxy5]

"since Hulu is Flash-based."

This, along with the fact that I can't simply drop a Hulu track on my iPod, is why I don't sit in front of my computer to watch television.

[professionaladventurer]

I use Hulu and itunes, but I can stomach a 30 spot to watch TV shows. It's a much more captive audience for adds then TV. Harder to pause during commercials and too short to run for a beer.

[AppleSuxLeo]

Hulu is one of the great things to have been developed for the net. Makes paying for a big pipe well worth it
The ads are so short compared to TV broadcasts. Plus not one dime goes to Apple !

[J. Blow]

There's no reason both models can't exist. They do now in terms of DVD vs. TV and many other examples.