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.

Advertisements

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?