Filling Hulu’s Tip Jar
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Filling Hulu’s Tip Jar
Why the online video service should make us pay.
Posted Monday, October 26, 2009 - 6:18am
For the past few years, it looked as if the Web would be a freeloader’s paradise. With ad rates rising, the Internet would be happy to provide a couch for you, free of charge. You were welcome to stay as long as you liked, as long as you were willing to put up with a few ads sprinkled about. Yes, there would be a product placement on each cushion. But a couch is a couch.
This philosophy was best-captured earlier this year in Chris Anderson’s book Free: The Future of a Radical Price. $0.00 was the Internet’s inevitable destination, Anderson wrote, because it allowed the maximum audience. Removing money from the equation meant you also took away the barriers of entry. Max audience meant max ad revenue.
The book, though, was destroyed in the press. These were the very people who were supposed to agree with Anderson that it was best to give their content away. And yet The New Yorker, the New York Times Book Review, and even The Big Money scoffed at Anderson’s naiveté. It was a watershed moment. Free was no longer good enough; the content creators wanted more. The Internet’s grand-opening giveaways were finally coming to an end.
All around us, the Internet seems to be rising up, screaming that it can’t live like this any longer. Successful startups are monetizing earlier and earlier, like toddlers trying to run a marathon before learning to walk. Content sites are constantly reinventing their business models, wondering how to stick ads in crevices once thought too remote or toxic to explore. News sites are contemplating pay walls, arguing that their content is too good and unique to be funded by advertising alone.
And now even great bastions of freedom are beginning to fall. Hulu, the streaming-video wunderkind co-owned by News Corp. (NWS), Disney (DIS), and NBC/Universal may start charging for content. Last week News Corp.’s deputy chairman, Chase Carey, said, "It’s time to start getting paid for broadcast content online.” By 2010, Carey said, that time may arrive.
To which I say, wonderful. If Hulu’s overlords force it to charge users, it will be the ultimate vote of confidence for the site. Of course Fox presumably needs to convince Hulu’s other co-owners, Disney and NBC/Universal, to back the deal. But it wouldn’t be putting the pressure on Hulu unless the site could generate meaningful money for all three companies. (That News Corp. chief Rupert Murdoch wants all of his digital content to be pay-walled doesn’t hurt.) In fact, the potential shift to a pay wall legitimizes Hulu’s business model so far. It will prove that Hulu is a success. And if Hulu handles this correctly, it could be a major boon for not just Hulu users, but the rest of the Internet.
Screengrab from Hulu.com. © All rights reserved.
Comments
I think that the basic
I think that the basic concept behind the whole social media websites is having a market share. For example, facebook wasn't really making money until earlier last year, and digg had been making losses for the previous two years. Yet, both companies are worth millions of dollars. Reason being, they attract a big audience. On top of Hulu, we have youtube, dailymotion, vimeo and several others. Though it is something to be thought upon.
when hulu fails we'll all go back to bit torrent
there is already a video service online that offers all programming, on demand, to any device, to any reigion, in any language, with no commercials. it's called bit torrent.
it operates for free and cannot be stopped by any means, legal or otherwise.
anyone who wants to make money selling content had better learn fast that their fiercest competitor has more selection, better quality, is platform independent, is globally available, and costs nothing. therefore your service needs to provide, at the MINIMUM, the following qualities:
1) convenience - run ALL the shows that people want to watch when they want to watch them
2) compatibility - run in any browser and on any device, including mobiles, game consoles, and set top boxes
3) stability - be online and able to serve content when users want it, and stick around long enough to catch on
4) zero monetary cost to the user - find a way to make money without collecting money from users... sweaty teenagers in their parent's basements run BT for free, surely you can figure out how to profit without charging users
this isn't some starry-eyed, pie in the sky, wishlist. this is the reality of the content market. this is what's available, right now, for free, with no ads, just a few clicks away. to justify the price of your service, you need to deliver something better than piracy can, like convenience, speed, social interaction, recommendations, methods for discovering new content, access to the communities that pring up around a movie or tv show, or access to the cast and crew. until you can, content startups and hollywood aren't going to make any money because they will continually be crushed by the competition.
For love or money?
This article makes a few interesting points, but comparison
between using a free video service and crashing on a friend's couch
without paying rent is terribly off-base. A much better analogy would
be patronizing an upscale yet affordable escort service: Hulu is in the
business of giving away professional quality content for a pittance, in
a world where people are lined up around the block to give away
slightly less professional content for free. If they want to start
charging more, they're entitled, but they shouldn't be surprised when
they start losing customers to the work of enthusiastic amateurs who don't charge a cent.
To put it another way: what the Internet has proven beyond a shadow of
a doubt in the last decade is that the overwhelming majority of
artistic and intellectual content creators aren't in it solely for the
money. It's true that some free content is offered as an exercise in
brand-building or as a kind of loss leader or free sample, but making
too much of those cases means you're overlooking the obvious. Give
people the tools to build blogs and slap together silly video content,
and they'll do it for next to nothing: we're living in an era where
cheaper means of production and better channels of distribution mean
that consumer attention is nearly as much of a commodity as content.
Old media giants, like the ones that own Hulu, will naturally want to
do whatever to hang onto their unhealthy monopoly on the common culture
as long as they possibly can, but there's no putting the Internet back
in the bottle.
Unless the new, premium Hulu offers content at rates that people feel
are fair -- and I'm talking about people who are used to getting loads
and loads of nearly-as-good content for free -- they will tank.
Not quite correct
koshertacohouse writes:
"People are used to watching TV for free."
-------------------------------------------------------------
Not quite true. Folks are used to paying $60/month, or whatever, for unlimited content TV.
Subscriptions will destroy Hulu
The network exec is misleading when he says that Hulu is giving away broadcast content; in fact, Hulu's model today is exactly like broadcast: the ads pay for the content.
The networks may think that installing a subscription on Hulu will increase their profits, but I suspect it will do the opposite. Many people will simply get their content from "unofficial" sites, and since that content is otherwise broadcast over the air for free, they probably won't feel an ounce of guilt over it.
What About Slate?
I assume this mean you guys are looking forward to charging, too.
Counting the inaccuracies
1. People are used to watching TV for free. By and large the content available on Hulu is network television content, not cable television.
2. People will pay for things, but they will not pay for things with ads. You cannot have it both ways.
3. People pay for Netflix because a) they use it to watch movies, which they are used to paying for, and b) it has no ads.
4. Hulu (and all "old world" content providers) are competing against anyone with $100 and an idea. More and more free content shows up online every day. While most of it cannot compete with the budgets and production values of network television, it can fill a void left by content people don't want to pay to watch.
5. I watch Hulu so I can watch shows on my schedule, not because I only sit through 1 ad per commercial break. I like that there are fewer ads, but more ads would not drive me away from Hulu. The compelling feature is watching what I want when I want, not skipping ads.
6. If the guys running Hulu were any good at all, they would be able to make way more money from advertising. As StarDude82 said, Hulu should be able to collect data on users, report that data to advertisers, and allow advertisers to pay premium rates to advertise directly to targeted consumers. Internet ad rates keep rising because advertisers are realizing the value of advertising to smaller niche audiences more likely to be interested in specific ads, as opposed to paying millions of dollars to get thrown before millions of eyeballs and hoping someone's interested.
As usual, the large companies running Hulu (or at least NewsCorp) are trying to find a way to force users to support their old business models instead of focusing on what users want and innovating. They will fade away, and it will be sad, but there will always be content providers who find a way to give people what they want at a price they're willing to pay.
You're right about all these
You're right about all these things, most notably the "on demand" feature. I agree that behavioral targeting is the way to go.
TV pricing has historically been based on scarcity, or the (relative) lack of other fun things to do. This is no longer the case, and is getting less so every minute. If I cannot watch TV on demand for free, I will find something else to do--even if you don't want to do something virtuous and taxing, you can be a brainless couch potato without needing TV more easily than ever before. Too many other options. And I'm paying too much for TV already. $750 a year, a truly staggering sum when you think about it, for basic cable (thanks, local monopoly!). And those shows are less-well-produced by the minute, and more damaging to the spirit than ever ("Real Housewives," "Shot of Love," etc.). And they also have commercials, STILL.
Hulu, TV sucks. Don't push it.
Consider the competition...
which is truely "Free." All charging for Hulu will do is push people back to more piracy. Hulu has the unique ability to ask about who is watching TV. Doing this, you'd think that they could be incredibly efficient in pinpointing ads to the right demographic.