Quality pays: Hulu trumping YouTube

Over at All Things Digital, Peter Kafka has some interesting news for those that believe YouTube won the online video war: it's actually losing.

Hulu.com, that stodgy competitor created by News Corp. and NBC, is beating YouTube, at least in terms of profit: Hulu is making roughly $12 million in profit, while YouTube is bleeding cash, according to Screen Digest analyst Arash Amel, with whom Kafka spoke:

Amel's model assumes that while Hulu is showing far fewer video streams to many fewer people than Google, it is able to sell ads on most of them-perhaps 80 percent of all streams have a paying advertiser, he thinks. Google, meanwhile, is thought to be able to sell ads on just 3 percent to 4 percent of its views.

Just as important, but not widely discussed: Amel believes that YouTube's costs are much more significant than most observers guess. That's because YouTube isn't just paying massive bandwidth and hosting costs for all those clips. It's also paying out huge licensing and content fees to copyright owners like music labels. Amel thinks YouTube is paying more for those fees than it does for infrastructure/bandwidth.

Perhaps we should be blaming the entertainment industry for charging such high fees and for withholding its content from YouTube, but this misses the mark. The entertainment industry wants to make money, and apparently feels that YouTube doesn't adequately protect its intellectual property. There is no reason that YouTube couldn't displace Hulu: it simply needs to show equal care for the industry's IP.

It also needs to improve quality. This is, of course, possible, as Monty Python's recent foray into YouTube suggests.

This will be hard as long as YouTube's model thrives on user-generated content, a significant portion of which turns out to be user-pirated content. (I should know, I was booted from YouTube for uploading a video that I shot at an Arsenal game last year. I didn't have broadcasting rights....)

This isn't to suggest that YouTube should become Hulu. It just means that YouTube needs to find advertising models that are suitable to its content...like user-generated commercials.

[crb0r]

Youtube is accessible from outside the US. Hulu, not so much. Youtube wins for me by default!

[benjwah]

Agreed.

[subslug]

Is this even comparing apples to apples?
Why would any serious company run commercials on Youtube versus Hulu?

I just don't think this is even a fair comparison, Hollywood quality video compared to basement quality webcasts.

[hulksmashlinux]

Youtube really needs a cleanup. I thought it was cool at first but without a add on for firefox to hide comments, it deteriorates into a sewer real quick. It also doesn't mind smutty videos, etc.

Hulu gives the appearance of a "professional" organization based on the premise of providing "free" content while making profit in background. Youtube could easily make a profit but it would take a totally different direction. Clean up the garbage and make it something people would be comfortable advertising on.

What Youtube REALLY needs is a professional media partner that knows how to play the ad game. They could pursue deals, clean up the garbage and present a much better user experience.

[tipoo_]

Last i checked, Hulu wasn't available to anyone outside the United States, and since i live in Canada youtube wins for me.

[gefitz]

Anyone in on the "why" behind hulu only offering product to US viewers? Is it something to do with the distribution agreements they've signed with production companies? I would presume the production companies involved (mostly, if not all, US production companies) have distribution agreements for their content in other countries; would these agreements contain barriers to online distribution?

Just wonderin'!

[Rabo101]

South Africa is THE most civilized country on earth - we even have GOLD MINES - how come we can't get the Hulu service here? Pure discrimination, that's what it is. And that is contrary to our constitution. Hulu, I give you three weeks, then I cutting you outa my will.