How Hulu Lost Its Place In A Netflix World

Hulu is a terrific service. Who could argue with free, current episodes of primetime TV on your computer? But for months now, Netflix has been eating Hulu’s lunch. And Hulu’s plan to fight back sounds more like a swan song.

According to the Wall Street Journal, Hulu’s role in the future might not be as an archive of network television at all. Instead, faced with splintering commitment from its partners and intense competition from Netflix, Hulu may upend its business model entirely. Instead of a warehouse of episodic content, Hulu could become a full-fledged online pay TV operator. That means live shows and video on demand, all accessed through Hulu.

It wasn’t supposed to be like this. Hulu launched with strong network owners in NBC and News Corp, even picking up media powerhouse Disney along the way. But with concerns that the free model takes too big of a bite out of their TV profits, those same networks are now looking to pull content from Hulu while at the same time licensing it to Netflix, Apple and others. It’s hard to grow up a winner when your parents don’t feed you.

Netflix, meanwhile, continues to roll. While it doesn’t have the depth of TV offerings that Hulu does, its movie selection is unparalleled and its TV selection is expanding rapidly (thanks, again, to Hulu’s owners). The service has 20 million subscribers. And studios, despite some hemming and hawing, would ultimately rather make a lucrative – reportedly up to $US100,000 per mid-season episode – deal with Netflix than rely on middling ad revenue on Hulu.

That’s just the current state of things. With licensing negotiations looming, some networks are questioning whether they should be giving Hulu exclusive content at all. Some are even mulling the possibility of making Hulu wait two weeks for new content.

So Hulu’s in trouble. But is becoming a live television portal online really the answer? Of course not. Whatever allure watching television live had – with the exception of sports and certain “event programs” – died out with the advent of DVR. It’s also hard to see how video on demand, would be a compelling offering to a generation weaned on iTunes, Amazon On Demand and their pay TV providers.

Companies and products usually evolve to meet the demands of their users. Hulu, though, is like a bonzai tree that the networks keep trimming until there’s nothing left but stump. What started as a way to keep YouTube from yanking all that ad revenue has outlived its purpose for the people writing the cheques. And turning it into another pay TV provider will be the best way to kill it off entirely. [WSJ]