Friday, June 26, 2009

Hulu, Getting Higher Ad Rates Than Their Network Counterparts

With less clutter, no fast forwarding, and a closer, more attentive viewing experience on the personal computer, it makes absolute perfect sense that sites like Hulu and are able to ask for higher CPMs. "Running an ad during The Simpsons on Hulu, for example, costs about $60/CPM, Bloomberg reports; running the same ad during prime-time on TV costs about $20-$40/CPM—or over 60 percent less in some cases." But is it really more profitable?

The challenge facing content creators, broadcast networks and cable especially, is embracing this new distribution path without losing an important revenue stream, cable subscription revenue. Authentication help to maintain a multi-platform customer, but not if it is undermined by free content, outside the security belt. What is in Hulu and's best interest may not be in the interest of its individual partners. So the question asked, can a higher CPM offset any revenue lost.

As I see it, monthly cable fees charged by cable programmers to distributors tend to grow at an annual inflation rate. It is also a guaranteed revenue stream, changed only by the growth and loss of subscribers in the cable operator footprint. And with the rise of telco distributors, overbuilding cable neighborhoods, the possibility of higher subscriber fees and more cable penetration. The switch to digital also improved subscriber growth. Should enough programming become available on the web, consumers might be encouraged to drop their cable portion of their bill for broadband access only.

It then represents a very slippery slope for sites like Hulu and and their respective programming partners. I'm sure they would hate to kill off their golden goose. And so the last question to ask is, what should happen to these sites to enable viewers to still watch on their computers, but not give up their cable connection. Perhaps authentication must come to these sites as well.

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