Tuesday, September 15, 2009

Hulu Will Kill Network TV

Remember the first song played on MTV, "Video Killed the Radio Star". Well the same is being said for online video and the biggest culprit may be Hulu. According to this Mediaweek article, "Hulu is the demon seed that will wipe out the network television business as we know it. In a new report, the Soleil Securities analyst estimates that the online video hub will cost TV networks $920 per viewer in advertising if their audiences are cannibalized by Hulu. And she believes the bulk of viewing on Hulu is indeed taking eyeballs from TV."

And while I can't speak to the revenue that could be lost, I am in total agreement that the Hulu model subverts the current cable subscription model. Some speculate that Hulu needs to change into a subscription model, but the challenge is if the revenue could offset the loss from cable. Others will simply use broadband to bring video for free; others may simply ask for a la carte pricing. IPTV means programming brought to the screen through a broadband wire. No cable subscription necessary.

Hulu executives disagree. They see Hulu as a companion to TV not a predator. "The report assumes the bulk of Hulu viewers use it as time-shifting device to catch up on shows they missed on TV and to avoid commercial interruptions. Hulu CEO Jason Kilar in April told Bloomberg that the site wasn't stealing customers from cable television." Unfortunately, as you change viewer habits, you change viewing. Younger audiences, with an eye on their wallet, are cutting the landline phone for a wireless phone only. They are doing the same with cable, letting their broadband service be their access to video programming.

At the very least, Hulu is playing on a slippery slope. Once you go down the mountain, it is much harder to climb back up.