....But It's Not A Success Story Yet!
Hulu.com, the free web site that offers high-quality streams of TV shows and movies in the U.S., looks like a runaway success: the selection of available content is more than decent, Hulu's Collections make browsing related videos easy, HD videos have been made available, embed codes are provided for re-posting the videos on the web, and the site gets a good amount of traffic, too. In fact, Hulu's CEO reported in March that 5 million visitors watched videos on the site during the past 30 days while the service was still in beta, and that number has been increasing ever since.To the average user,
Today, Hulu is reporting that they saw 63 million streams during their first month of measurement, April 2008 - that's a lot of eyeballs! Unfortunately, it's not enough to label the site a success.
Despite the number of visitors and streams, Hulu's success doesn't translate into big business - at least not yet. A recent Silicon Alley Insider article is speculating that Hulu will earn between $45 - 90 million during their first 12 months - April 2008 through March 2009. However, after paying off their content partners, their net revenue will be between $12.5 million and $25 million. (For how they arrived at those numbers, click here).
While those numbers aren't bad for a startup, as the article points out, they're not great for transforming Hulu into a wildly successful business, especially when you compare it to the "pay-for-content" iTunes model, which apparently turned a $570 million profit last year. Of course, iTunes' library is much larger, but it still shows that there is big money to be made by charging for content.
The problem with Hulu really has nothing to do with its design - sleek and easy to use - the problem is the tight stranglehold networks still have over their content. Major networks CBS and Disney (ABC) are not even on board yet and the networks that have joined yank their content down after it's five weeks old.
Instead of offering an online site that competes, not just with television, but also with our trusty DVRs that can record and save every episode of a show, Hulu only offers a smattering of hit-or-miss content where you're not even guaranteed to find the one episode you came to the site in search of in the first place. Case in point: Family Guy's "Blue Harvest" episode, a Star Wars parody, became so popular that it's been released as a standalone DVD. Even though having that episode alone could drive scores of visitors to Hulu's site, it's nowhere to be found. But do you know where it can be found in a matter of minutes? BitTorrent.
So, Hulu loses to the pirates when it comes to content and it can't even compete when it comes to offering a legal alternative to watching TV online either, since other networks don't want to participate, happy to host their streaming content on their own web sites or - in the case of some smaller networks - not at all.
Well, maybe Hulu doesn't really want to be a huge money-making machine. After all, isn't the internet all about serving the long tail? And the advertisers seem happy enough for now as it is. For example, a P&G spokesperson reported that the company, a partner since the beta launch, has so far been "pleased with the results from Hulu" and "will continue to evaluate it as a way to reach our consumer." Perhaps Hulu just wants to stay in the black while hoping to make a small dent in the number of users rampantly pirating video.
As Hulu grows in popularity, their bandwidth, marketing costs, and overhead will increase as well, and it will remain a struggle for the company to earn revenue. But if they can't make a successful business out of providing legal online video, then who will?