Friday, March 27, 2009

Could Disney Join Hulu? Sources Say Talks Are Serious

Why is Disney thinking of joining Hulu? Is it the equity stake? And why join a group with your broadcast and cable competitors and share knowledge and revenue with them. If anything, Hulu should demonstrate to Disney that high quality content, professionally created, on a good player, with strong marketing can work. That Hulu grew from nothing to second place in a couple years is amazing. But why share?

Let me look at the pros. Hulu is an amazing distribution point and has fed the hunger of online starved consumers eager to consume videos online. Its meteoric growth, its advertising model, its stickiness, all encourage viewers to watch multiple videos and stay connected with it. And despite a silly name that many people still mistype as HULA, its a slick and well managed website, easily searched and navigated, offering top views as well as variety. "Why now? One source says, 'Hulu has more scale (than the networks), which is why I think they’re back at the table.'” So why isn't Disney also talking with CBS's

And now the cons. The web is open with low barriers to entry and Disney has a great brand and the marketing savvy to build its online business. And where will Hulu be after the departure of people like George Kliavkoff of NBC and Peter Chernin of Fox. In addition, Disney has cable distribution partners eager to keep the subscription model alive; aligning with them and offering exclusivity to cable customers with a broadband connection, may be the added value that actually helps to increase license fees, not destroy them. Certainly, Fancast, Comcast's online portal, would love to have an exclusive window on some full length ABC, Disney, and ESPN content. Hulu may bring some advertising revenue, but it may also cause some viewers to disconnect from cable to only get their shows online.

Online video is also more than just watching online. The fun is in the social networking, the message boards, the casual gaming, the quizzes, the interactive elements that extend beyond simply watching a TV show online. Hulu may be one means of entry, and certainly today a popular one, but by no means the only one. My advice to Disney, look internal first; there may not be a need to enter into a partnership.