Hulu is at the center of much of the controversy over how television will fare in the Internet age. The joint venture of NBC, ABC, Fox, and others offers one of the most complete collections of online TV content on demand. But it has blocked some key services such as Google TV. It also has announced a subscription service, Hulu Plus, for $10 a month–again, though, not yet available on a lot of the so-called over-the-top TV devices.
You should be able to watch Speed Racer when it’s convenient to you. You should be able to view advertising that is relevant to you.
So what’s the future of TV going to be like? It’s going to be a number of different things. Consumers will be able to watch what they want to watch, when they want to watch, wherever they want to watch. Most content will be delivered over the Internet eventually. This will be disruptive.
Brand advertisers want more targeted ads and less waste. This will be disruptive to brand advertising companies.
Some results, 36 months after going into beta (when, he notes, the venture was widely derided as ClownCo): 30 million users have accessed in last month, 260 million content streams (entire episodes), over 800 million advertising streams, 235 content partners, 352 ad clients in last 90 days. Revenue: Over $240 million in 2010, up from $108 million last year.
OK, the future of TV: Any scenario has to have advertising at its center. 41 cents of every dollar generated through premium TV content comes from advertising. So that’s the leading source. So that’s going to play a very big role in the future of television. And brand advertising is the huge opportunity.
How Hulu is pursuing this push: There’s too much advertising run against premium content. Everyone has to lighten up. Eight minutes of advertising per half-hour, way more than it used to be. It’s not the ideal balance. It’s out of balance, quite frankly. It’s not surprising you see the rise of DVR, for ad-skipping. So we’re running fewer ads.
We should let consumers choose which ads they want to view. (This is something YouTube recently started doing too.) Hulu also has been asking users (online) to answer a question that tells something about them, like whether they’re in the market for a car in the next six months. (Hey, why not? Skirts privacy issues too, since you have the choice to answer or not.) And they’re giving consumers the choice to watch an ad, say a movie trailer, in full before the video they want to watch, then have no interruption the rest of the video.
New: On every ad, if you don’t like the ad you’re watching, you can choose to trade it out for another ad, sometimes ones targeted to your interests inferred from what shows you watch or other data.
So what’s this all mean? Ads on Hulu are 55% more effective than the same ads that run in conventional channels, according to Nielsen. There’s so much open road when it comes to effectiveness in brand advertising. $60 billion spent on ads on TV–double that of Internet ads.
Now Om Malik is doing a fireside chat with Kilar:
More specifics on Hulu revenues: $25 million in 2008, $108 million in 2009, and over $230 million in 2010. (No ClownCo, it seems.) We feel really good about the trajectory of the business.
Q: IPO? Kilar: No comment.
Q: It’s not clear what Hulu’s approach is on devices. Public issues with Boxee, etc. Kilar: Our ambition is to be on any Internet-connected device on the planet. Under all of that is the economic model that has to work for our customers–not just users but our content partners. It’s not a technology issue. We need to make sure we have an economic model that works great for content owners. Clearly Hulu Plus is a big part of that.
Q: How many are using Hulu Plus? Kilar: Can’t share yet. Ahead of plan. You had to have an invite until now to subscribe. The number of subscribers is well ahead of what we expected at Day 100.
Q: Why ads on a subscription product? Kilar: There’s nothing that prevents us from presenting an ad-free version of Hulu Plus. Would you prefer to have a price (higher) that’s ad-free or a price (lower) that has some ads. Vast majority of people, he says, prefer the latter.
Q: With so many corporate parents, especially three big ones, do you feel beholden to them and their business models? Kilar: That’s a risk for Hulu. In my original conversation with Peter Chernin and Jeff Zucker, I said we needed independence. (Of sorts, anyway.) But it’s no different than, say, if you’re Apple or Amazon. You may have a certain view of the world that is different (from customers or suppliers or partners).
Q: TV business has benefited from ambiguous return on ads–will more effective ads cause a business problem for them? Kilar: There is no way brand advertisers spending $400 billion isn’t going to get served in a better way. There is going to be more accountability for advertising.
Q: What do you make of cord-cutting movement–is it real? Kilar: It’s a salacious topic. I think it’s premature. Hulu and Hulu Plus and Netflix, those three services have all been consciously designed to be different and not a substitute for pay-TV services in the living room. (This is true.) You can’t get sports, etc. from Netflix and Hulu. I’m not suggesting that in the next decade that you’re not going to see serious changes in the distribution landscape. You will. But to call it today is premature.