Hulu-Disney deal hurts YouTube, helps cable
Sure, for a year now, YouTube has trailed Hulu in the number of TV shows and films it offers, but in recent months all the momentum appeared to be with Google's video site.
That was until Thursday, when Hulu announced a partnership with Disney that at least one industry analyst believes has smashed YouTube's chances of becoming an online hub for top TV shows and feature films.
Disney will provide Hulu with full-length ad-supported episodes from ABC, SoapNet, and ABC Family. Some of the shows include "Lost," "Grey's Anatomy," "Ugly Betty," and "Scrubs." Some Disney films will also appear on Hulu, the ad-supported streaming video site formed by News Corp. and NBC Universal. Hulu has now locked up content from three of the largest six film studios.
As for the other three, Sony Pictures has deals to provide a small amount of long-form, ad-supported content with both Hulu and YouTube. Warner Bros. has largely kept long-form content off the Web, and Paramount, which provides Hulu with some TV shows and a smattering of films, is unlikely to join Google-owned YouTube anytime soon. Paramount's parent company, Viacom, has a $1 billion copyright suit pending against YouTube.
What this all means is there just aren't that many other places for YouTube to acquire high-end content.
"(The Disney-Hulu deal) is not good news for YouTube," said James McQuivey, an analyst at Forrester Research. "Any hope of creating a professional-content business has probably disappeared."
A YouTube spokesman issued this positive-spin statement: "More content coming online in more places is a win for consumers and provides further validation of the growth of the online video market."
Cable sector should jump on Hulu
Besides Hulu, the big winners in the Disney partnership--which also involves Disney taking an unspecified equity stake in the video site--could be Comcast, Time Warner, and the cable industry.
Some of the major cable operators have griped in recent months that some of their subscribers are dropping cable in favor of watching TV shows and films online. Now, according to reports, the cable guys are seeking ways to compete on the Web.
Up until now the cable companies have had to negotiate with individual studios. Hulu potentially provides a way, according to McQuivey, to obtain a wide swath of TV shows and films with a single handshake. He also sees the opportunity for offering premium Hulu services, which might make sense at a time when Hulu continues to offer fewer and fewer episodes from popular shows.
Man of the hour: After signing blockbuster deal with Disney, will Hulu CEO Jason Kilar partner with cable industry?
(Credit: Greg Sandoval/CNET Networks)"Comcast can tell NBC and News Corp., 'We want to put your Hulu system in front of our subscribers'," McQuivey said. "'But we want to give our customers more. If Hulu is posting four episodes of a show online we want our subscribers to have 12 episodes.' I'm 90 percent certain sure these conversations are already happening."
"In order to get Hulu," McQuivey continued, "you have to be high-speed broadband customer and maybe also spending top dollar on TV services."
What would Hulu receive in return? McQuivey said maybe the cable companies would share subscriber revenue with the site. He added that Hulu is probably making decent revenue on ads, but advertising is tougher online. Hulu, he said, "might look at cable to help accelerate some of their revenue potential."
Tougher to sell ads online? McQuivey might be guilty of a gross understatement. Anybody who spends any time on Hulu has noticed the growing number of paid service announcements. Last year at this time, site managers trumpeted that they had sold out of ad inventory. Hulu hasn't made any such announcements lately.
While advertising is down for nearly everyone in media, there is a growing skepticism in Hollywood that the ad-supported online model can generate the kind of revenue the studios see from broadcast, cable or DVD sales. One industry source told me that "to generate a worthwhile profit from an online broadcast, you have to throw in lots of ads, and that will only prompt viewers to log off."
As for McQuivey's idea that Comcast could negotiate to obtain more shows, the studio source said that there's a reason why Hulu is carrying fewer episodes from shows than it once did. There's concern in Hollywood that offering too many episodes may cut into DVD sales. The source said the studios see big revenue from the sale of DVD versions of TV shows. Asked whether the studios have seen a sales drop-off yet, the executive said, "No."
Of all the major studios, only Sony Pictures appears willing to offer consumers access to a wide variety of full-length feature films on an ad-supported basis. This week, the studio announced that more than 100 movies, including "Spiderman 2," "La Femme Nikita," and "Candyman," were available at Crackle.com, the studio's online video site.
McQuivey said that after doing an analysis on the problem, he's also doubtful ad sales can generate meaningful profits. Ads alone won't make the Internet a "replacement model," he said. "You're going to have to look at some kind of subscription model."
Maybe he's on to something. "With respect to how (YouTube) will get monetized, our first priority is on the advertising side," Eric Schmidt, Google's CEO, said after Google reported first-quarter profits earlier this month. "We do expect over time to see micropayments and other forms of subscription models."
Greg Sandoval covers media and digital entertainment for CNET News. He is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at http://twitter.com/sandoCNET. 
What makes Hulu so successful is that it's FREE, CONVENIENT, and EASILY ACCESSIBLE.
Take away any one of those, and me (along with everyone else) will quickly fade away from their fanbase.
I love Hulu the way it is now, and with the prospect of Disney-owned content, it seems to be getting even better. I just hope that all its success doesn't coax it into signing some contract that ruins it for us users. If it's not broken...don't fix it!
Cable companies see Hulu as a competitive threat to their cable business. If Hulu were able to offer everything cable could offer (which they can't yet), then nobody would bother with cable. They'd just buy an IP connection.
Can you imagine the erosion in revenue that this would cause for cable companies? Obviously that's why cable companies are trying to limit the amount of content consumers can download on the pretext that it will break their network. Of course, this is a total lie. Look at Cablevision.
Anyhow, what the cable companies are trying to negotiate is for Hulu to only send content to their customers and not to the open internet. The open internet allows anyone to access Hulu content from anywhere. This open nature of the internet further reduces cable companies to commodity broadband providers. Of course, Hulu will never agree. So they will roll-out some abomination of a compromise that will do nothing to prolong the cable business model.
The majority of people still receive TV broadcasts over the air. The new DTV system plus the sour economy may increase the number of people who only use over the air TV.
These streaming media sites like Hulu have yet to provide HD content that can compete with the DTV system. Most people want to watch TV on their TV's, not huddled over a desktop computer or a laptop.
Hooking a computer up to a TV is not mainstream, and will probably never become mainstream.
And if Hulu were to go Silverlight, I would never consider it.
If you cannot see the difference between 420p and 720p/1080i, then you need a new eyeglass prescription.
It is not some hollow marketing ploy because measurable specifications can back up that HDTV is far superior than SDTV.
Do everyone a favor and make an optometrist appointment now. The public does not want your near-sighted self driving on the public roads.
Even without commercials...I wouldn't pay a penny for most of the junk on TV nowadays.
Half of it's not even worth my time to watch on Hulu for free!
YouTube obviously didn't get popular with long-form content, because they didn't have any at all for a long time. What got them popular, and what will keep them popular, is the long tail. It's the same as Netflix, Wikipedia, IMDB, Amazon, or pretty much any of the other largest net-based companies on the internet that you can think of (hell, Google).
If you want to see that old Autograph video from 1985 - and I don't know why you would, but say you did - where would you go? Not Hulu, YouTube. If you want to see the latest White Castle commercial because you're writing a blog post about it (as I just did), where do you go? Not Hulu, YouTube. If you want to see an amazing video Spike Jonze made showing a bunch of kids skateboarding in slow motion through explosions, where do you go? Not Hulu, YouTube.
And every single day, hundreds of thousands of people make that same decision, for hundreds of thousands of *different reasons*. That's the long tail in action. The long tail is real, and all of the biggest internet sites are an example of it.
I'm not saying Hulu won't be or isn't successful doing what they do. The hit-driven business can be a perfectly good model, but the problem is you're completely reliant on the next big thing all the time. What happens when LOST and Grey's Anatomy aren't popular anymore, or end? Well, Hulu had better hope Disney's got something else that is. YouTube does not have that problem.
Both companies will likely continue to grow. But YouTube's in a safer place.
Check out themediamall.com and thefuzznetwork.com. Both those sites are great start.
It?s obvious that you have taken the side of the media companies and you offer a somewhat shallow prediction of an industry that is has shown abysmal performance in displaying any competence in innovation around video distribution in the last 30 years.
I don?t think you can easily discount Google?s competitive advantage on the Web. If the there is such a thing as a precident for Web content distribution models ? you need look no further than what Apple has done with I-Tunes compared with cable rivals that have done next to nothing. One thing for sure is that a complex and multi-faceted picture is emerging what TV 2.0 will be. I would gauge that technology companies might be a little more competent in an industry that is rewriting the rules.
Sincerely,
Jim Snyder
Net-Net Analytics
I don't understand why it's hard to get money from advertisers for tv shows on the internet. I DVR about 99% of what I watch on TV, and I never watch commercials. But when I watch a show online, I can't skip the commercials. So I actually watch them. Also, since they only show one commercial per commercial break, I don't start doing something else, since I know the show will be back on in 30 seconds. So they're actually getting me to watch the commercials. Seems like a no brainer to me if I was in advertising.
I feel like YouTube should have chosen a direction to persue. They should have stuck to user-uploaded content, and allowed for pretty much anything and everything to be there, rather than constantly removing videos because they "violate terms of service". Or they should have tried to make the move to official and legit content. But the way the went about it, sort of a limp-wristed approach to both, i think hurt them pretty bad
youtube is not the place to watch 30 mins + shows its the place to watch 5 min or less clips and i don't think they are ever going to get away from what ppl see them as.
STAY FREE HULU AND YOU ALWAYS GOT ME!!!
- by Paladin1650 May 10, 2009 7:42 AM PDT
- I'm in favor of micropayments for TV shows. Why not create an account with your credit card, and simply charge the card $0.10 or whatever whenever you watch a show on Hulu? The charge per show could decline the more shows you watch in a month or something. That would be much more convenient to me instead of needing to buy huge DVD collections or download pirated copies of unknown quality.
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