Disney/ABC joins Hulu: What it Means

April 30, 2009

Today Disney and Hulu confirmed the long-running rumor that Disney would join News Corp. and NBC Universal as equity partners in the most successful professional video content site. According to the Wall Street Journal, Disney will take an equal share by ponying up a similar amount of cash that the prior equity investors put in. 

I applaud this move. It’s going to bring short-term and long-term benefits to the industry. This move:

  • Creates needed short-term online advertising efficiency. I’ve recently written a report for Forrester about the struggles of online TV shows, including Hulu, when advertisers are cutting back every expense. By joining forces and standardizing the ad buying process, ad formatting, pricing, and so many other friction-laden processes, these major networks are going to keep some portion of ad revenue that might otherwise have been lost.
  • Keeps YouTube on the professional video sidelines. YouTube had made a good effort to bolster its online TV show offerings with some CBS content and some links to ABC. But it hasn’t been enough to change what users expect from YouTube. (Tidbit: While YouTube accounts for nearly half of all video views, it only accounts for less than a fourth of video minutes because people go there for short clips.) With ABC clearly aligned with Hulu, it makes it less likely that any of these players will care to sustain YouTube’s online TV ambitions in the future.
  • Makes it nearly impossible for CBS not to join. CBS has invested millions in its own effort and it may not want to give that up. But so did ABC — in fact, ABC was really the boldest of the networks in terms of technology investment and strategic energy. With the other 3 networks heading down the yellow brick road arm in arm, it makes sense for CBS to benefit from the same market power Hulu will now command.
  • Sets up the cable industry for Hulu 2.0. If you’re paying attention, you have noticed that neither Hulu nor ABC have shown up on the Xbox, the Roku player, Blu-ray, Connected TV or any other over-the-top solution. This is because they are saving themselves for the cable industry. They don’t want to upset the cable industry, sure, but more importantly they want to position themselves to partner with cable to deliver Hulu 2.0 to the cable subscriber. Where Hulu 1.0 will remain free for online viewers, Hulu 2.0 will provide not just 4 episodes of a TV show, but all the seasons of the show to date, plus back seasons, and even new release movies. And all of this will be available online as well as on the TV. That experience will be available to premium cable subscribers and the revenue will be shared back to Hulu. 

What do you think it means? For content players, device makers, consumers?


There’s an online TV storm a brewin’

March 27, 2009

I wrote earlier this week about how Hulu is now streaming as many views as Comcast does via VOD. But what I didn’t take time to include is the dark side of online TV shows. The fact that many networks are pulling down some of their top shows (e.g., The Mentalist and It’s Always Sunny in Philadelphia.), and how the ads on these wildly popular shows are not all selling.

So I took the time to compile all the evidence that an online TV show storm is brewing and did an analysis for Forrester clients that was published earlier in the month. The great news is that Forrester recently recognized its 10,000th Twitter follower and to celebrate, they let him choose a Forrester report to make available to all of Forrester’s Twitter followers. This individual (@jpthomp on Twitter) chose my report about the coming online TV show backlash. That means good things for all of you, go to the following link to register to get a copy of the report (thanks, jpthomp!). http://snipurl.com/emg3g 

When you get a hold of the report, you’ll see that I envision a lot of experimentation with online show availability throughout the rest of this TV season and possibly even throughout the rest of the year. And with online TV shows failing to sell out their ad inventory, some naysayers inside the major networks are going to be arguing for much more aggressive anti-online measures. We think it will take some time, but online TV can be brought back around again as the recession matures and as executives realize that online TV is not a separate kind of TV, it’s simply the extension of existing TV experiences across multiple platforms. In the report, we sum up the call to action this way:

OUR PLEA: INTEGRATE ONLINE TV INTO THE TOTAL VIEWER EXPERIENCE

If you expect us to end with a summary of all the reasons that online TV shows are the future of TV and a plea to preserve this threatened species, prepare to be disappointed. We said online TV was the most important thing to happen to the video industry not because it was the future of TV in and of itself but because it would help move us quickly into the future of TV, something Forrester calls OmniVideo; this is a state in which consumers can watch TV shows and movies on any platform they want, controlling what, when, and where they watch. In this future, not only will consumers be satisfied, but producers and distributors will make more money than they do today. That’s why we now plead with the industry to quickly learn from the mistakes they’re going to make in the next few months and get back to fully supporting online TV shows — not as a separate business but as an integrated consumer experience that complements and enriches traditional TV.

Check out the report yourself, see what you think. Let’s buckle our seat belts and see what happens over the next few months.


Hulu breaks 300 million view barrier

March 26, 2009

This week, Hulu released comScore’s latest VideoMetrix chart that shows the site broke through the 300 million views in a single month barrier. This barrier is significant for a few reasons: 1) it’s higher than I thought it would be, so I’m humbled; and 2) it’s roughly the same number of streams that Comcast does each month in its onDemand system. To illustrate both points, let me quote myself from last October when Hulu reached a meager 150 million views:

This is phenomenal, it’s precisely the year-end target I had for Hulu in December. Now I have to ratchet that up to 200 million. To go from 0 to 200 in under a year is remarkable. Consider that in its best months, Comcast VOD streams 300 million video views. That’s a big number. Hulu will be at the level some time next year. Without having to invest in VOD servers the way Comcast did. (See my original blog post for more.)

Let me reproduce the VideoMetrix chart (source: comScore, February 2009) so we can do some analysis.

comScore Video Metrix February 2009

Quick note for those new to this kind of stuff, “aHulu (Hybrid)” refers to the fact that some portion of Hulu’s views come from its syndication partners like AOL and MSN. That means any Hulu views that occurred there are not counted there, instead they count back at Hulu. We don’t have any solid estimates of what portion of views are coming from Hulu.com itself vs. its syndication partners, but I have a hunch it’s shifting more toward Hulu over time as Hulu has attempted to brand itself more aggressively.

Looking at this chart, we can do some fun math (I know, not two words you’re used to seeing together). We can see, for example that the average viewer is watching Hulu about 16 minutes a week, far ahead of everyone but YouTube (which accounts for the lion’s share of the Google Sites line). That means the average viewer might watch a show every other week, which indicates the beginning of a habit. Hulu beats everyone else in minutes per stream, at 6.7 minutes, comapred to 3.5 for both Google and CBS. That’s obviously because Hulu people are watching full-length content. Most interesting, though, is the fact that Hulu now accounts for 5% of all online video viewing minutes. The only other site that has more than a single percent of viewing minutes is YouTube, which accounts for 29% of viewing minutes.

Yes, YouTube still rocks the house. But Hulua is clearly the second most important US online video provider. 

And it has only been in business for a year. I’m starting to regret boasting about the fact that I never saw Hulu as a YouTube killer the way some people did when it was first announced. While it’s not technically a YouTube killer (these numbers attest to that), it’s certainly a YouTube distractor since it actually has a model for making money from these views, which  YouTube does not. 

 


Why Hulu is clashing with potential partners

February 23, 2009

Two news items from last week are worth commenting on in the same post:

  1. Hulu insisted that Boxee pull its Hulu player from Boxee. For the un-nerdy, Boxee is the open-source media player software that I put on my Apple TV a few weeks back. Until last week, it allowed you to access Hulu online videos direct to the TV without the help of a PC. 

    The Boxee/Hulu experience is tremendously satisfying. Plus, it preserves all the advertising that Hulu needs to sustain itself. However, by making it super easy (some might say, convenient) to get online TV shows to the TV, Boxee is a threat to Hulu’s content partners, many of whom are still petrified about cannibalizing linear TV shows. So while those partners may be willing to support PC-based viewing, the moment Hulu is easily accessed on the TV, they get creeped out. Never mind that 5 million PCs in the US are currently connected to TVs for exactly this kind of experience — far more than AppleTV or Roku will ever have.
     

  2. Hulu pulled its content from syndication partner TV.com. TV.com is a CBS-owned TV fan site that previously focused on chat rooms and clips, but as of a month ago announced an online TV player strategy designed to monetize its 5 million viewers more effectively. The secret sauce was access to Hulu content (Fox + NBC) as well as CBS content, delivered through a player experience that was remarkably Huluesque.

    Design infringement aside, it’s hard not to see this one as an effort by Hulu to persuade CBS to allow CBS content to join the Hulu experience. If it’s not such an effort, it should be. Hulu is eager to allow syndication partners like Fancast and IMDB to succeed, but it doesn’t really want to enable CBS to have all the benefits of Hulu content without having signed up to be an official part of the system. Seems fair. Honestly, the only reason CBS wouldn’t want to do this is it would mean acknowledging that its costly and time-consuming solo syndication efforts were not enough. 

What’s going on here: Hulu is getting more and more powerful every day. And not just because it managed to get Alec Baldwin to promote it during the Super Bowl. It’s because Hulu gives people the thing they want most: easy access to top TV shows. But with great power comes great responsibility, at least in the mind of TV execs who suspect that Hulu will eventually erode their TV business (which has been steadily eroding anyway, not on an overall basis, but on a per-show basis).

With ad dollars tightening in a recession — across the board, mind you, not just in online video — TV execs who never liked the idea of online video in the first place are going to claw their way back into prominence inside their companies and start arguing for more restraint. We’ll see more removals of TV shows like The Mentalist, more announcements like that from SciFi about postponing Hulu streaming of  Battlestar Galactica until 8 days after broadcast.

All of this is part of something I call the coming online video backlash. It’s going to take this whole year, and it’s going to inspire a lot of hasty moves on the part of TV executives to pull previously available content. And consumers are going to hate it.

I don’t envy Hulu’s position in this. It has to keep the lines of access open to the providers of top TV content, but it has to make good on its promise of serving viewers. So far, it has done a great job, but at some point, it’s going to be forced to do something that will begin to tarnish its brand. I don’t personally think the Boxee removal qualifies — only a few tens of thousands of us are nerdy enough to have hacked our Apple TVs — but sometime soon, somebody at Viacom or Fox or Sony Pictures will recall content that was previously available. Expect it to happen around sweeps weeks or the season finale weeks. It’s gonna get ugly.


Online TV show ads in peril?

February 13, 2009

A few weeks back I asked you for evidence of whether online advertising was showing signs of growing or shrinking. I got some feedback, but none of a smoking gun. Then I spent a few sick days watching a lot of Hulu on my TV screen. I mean, a lot. (I even took a brief look at that Heroes movie with Henry Winkler and Sally Fields that keeps showing up in my recommendations queue for obvious reasons. Talk about a very obvious database-matching exercise gone awry.)

If you haven’t watched Hulu lately, check it out. Are you seeing as many PSAs as I am? I didn’t know the Air Force had so many ads to show. And I didn’t know there were that many eco-friendly organizations as I’ve met lately on Hulu.

I’m even talking about top shows like The Office or House. Is it possible they aren’t selling out their inventory on these great shows? Gratefully, I was spared the flood of PSAs once I started catching up on Battlestar Galactica (BSG). Sponsored by DirecTV, BSG affords a perfect example of online video advertising done right. Yes, DirecTV sponsors the whole show, but each ad is different. Featuring John Michael Higgins in the fictional board room of a generic cable company in panic, these ads deliver. They’re so funny they actually make me wish that satellite TV wasn’t headed for the sidelines.

But brilliant touches like these are few and far between. Again, I’m asking you: is online TV advertising in danger of failing to support this fledging new medium upon which so many millions of us have become dependent?


Roku’s next steps: Hulu, then Yahoo TV Widgets

February 12, 2009

If you read this blog often, you know I’ve been road-testing a lot of set top boxes for the past two years. I do this because I cover video, but also because it’s a disruptive moment in the history of the video and if there’s lessons to be learned about disruptive innovation, this market provides ample opportunity to be tutored. (All props to Clay Christensen at HBS, by the way, for defining the way we all look at disruptive innovation. That’s worthy of a separate post at a later date.)

After spending significant time with the Roku box during some recent sick days, I have concluded that the Roku is still the box that delivers the most punch, especially considering its price. That’s why the Roku box won our Convenience Quotient analysis on set tops last summer and it’s only getting better as the Roku team adds more content. 

The Roku is the only box that I want more than one of — one for the living room and one for the family room.

But it still has a long row to hoe if it’s going to end up in a million homes. In particular, I see a threat in the form of connected TVs. I’m writing a piece for Forrester on that topic right now, should be out in a few weeks, but the conclusion is pretty optimistic: thanks to supply-side energy, the Yahoo TV Widget space is making it likely that connected TVs will be in more than a million homes by year-end, possibly two million.  

So here’s my prescription for Roku to stay in this game. I haven’t discussed these things with the team there, but I’ll make them a matter of public record so that if I’m right or wrong, at least I’ve been bold.

1 – Get going on Hulu. This might mean starting with CBS (which is dramatically more open to radical syndication moves, as evidenced by the YouTube relationship) or Viacom, as a way to show Hulu that this is the way things are moving. The sooner ad-supported TV shows up on Roku, the sooner it’s a must-have $99 box for everyone.

2 – Become the first set-top box to implement Yahoo TV Widgets. I cannot get this widgets solution out of my mind. It’s such an elegant way to open the market to innovation and I like innovation. From what I’ve learned from the people in charge of the Yahoo TV Widgets strategy, the code to accomodate the widgets should be relatively simple to put on the moderately powered Roku box. But the beauty of having widgets on the Roku box is it would immediately relieve Roku of needing to strike separate content deals with every possible content provider. Instead, it can just let content providers develop whatever they want for the platform, making the box more valuable with each passing day. 

The fact is, every box, DVD player, TV, and game system (Wii Widgets?) will eventually implement Yahoo TV Widgets. (I know that’s music to Yahoo’s ears, but when you do the right thing strategically, it tends to work.) So Roku better hurry. 

Last thought: once these steps have been conquered, it’s time to start courting HBO and other pay TV providers to discuss delivering subscription-based content to the Roku. Not something HBO wants to do (not something Comcast wants it to do), but it’s where things are heading. And as long as HBO is priced higher on the Roku than it would be through Comcast, which is certainly what HBO would have to do, it might be feasible by 2010. 

What do you think?


Why Hulu’s Super Bowl ad is as smart as it is funny

February 4, 2009

I’ve been answering press questions about Super Bowl advertising for a decade or more, both as an analyst and as an academic (used to teach advertising management at Syracuse back in the good old 90s when your only way to watch Super Bowl ads was on TV or VCR). It seems that every year I’ve been involved the press stories say the same thing: Ads cost too much and aren’t as good as they used to be. 

Once in a while, an ad comes along that is brilliant. That brilliance is usually measured on the funny-meter, however. Rarely does it mean that a product has been properly promomted.

That’s what makes the “Huluwood” ad from Hulu featuring Alec Baldwin so brilliant. Not only is it funny, but it actually accomplishes a very subtle yet powerful marketing objective. Watch the commercial, have a few laughs, then read on.

Vodpod videos no longer available.

Why is this ad so good? Because it positions Hulu in exactly the right light. Instead of trying to say that Hulu is some kind of new service “unlike anything you’ve ever seen before,” this commercial makes it clear that Hulu is just TV, taken to the max. Which is exactly what people want. They don’t want Gemini Division, they don’t want LonelyGirl15. They want Lost and Family Guy and The Office. And they want it whenever and wherever they want. This is exactly what Hulu gives them and it’s the USP (unique selling proposition, sorry, I’m slipping back into professor mode, I can almost smell the classroom now) the ad delivers.

Personal riff: I absolutely love the new phase in Alec Baldwin’s career that this commercial epitomizes. From the guy who first interpreted Jack Ryan on the big screen in Hunt for Red October to this slightly hefty but immensely comedic persona that 30 Rock unleashed, I think he’s a million times more interesting now than he ever was in his movie star days. I don’t know how big a role Tina Fey had in bringing this out of him, but I assume she had a role because she is, after all, a genius.