Hulu Hoop

3 02 2010

The Road to Profitability, like that famous Highway to Hell, is paved with good intentions. No one except fools and tax cheats go into business with the idea of intentionally losing money. The idea is to earn a profit (it’s the American way, right?), but it requires a certain magical balance of having the right stuff, in the right place, at the right time, and at the right price. Pass through these Four Hoops of the Financial Apocalypse, and everyone from CEO to stockholder is happy.

The only problem is that, in the realm of the interwebs, the price had better be free. Or you may find yourself on that parallel road to Hell.

The latest web startup to ponder eternal sunburn is Hulu with their proposed tiered freemium pricing model. Thus far, Hulu has been the darling of Hollywood and viewers alike, because complete TV episodes can be viewed for free. It’s the perfect YouTube alternative. The site is currently ad-driven, with viewers having the option of seeing the ads all packed at the beginning of a show, or scattered throughout. But the giving-it-all-away idea is weighing heavily on Hulu owners and management.

Hulu was an experiment in the simplest of terms, because no one really knew if viewers would sit still long enough to watch an entire episode at their PC. The answer, as many of us know, is a resounding yes. In fact, some 1 billion videos were viewed in December 2009. That’s a lot of eyeballs.

But the problem every startup faces is how to monetize the thing. Apparently the ad-only model is not bringing home enough bacon, because management is considering adding two levels of premium viewing options to complement what will remain as a bare-bones free level of service.

Walmart and every other retailer could never survive if they gave everything away. All that right place, right time business is moot if there’s no cash registers ringing. Yet online content is an entirely different animal. The New York Times is convinced it can get away with charging for content in the near future, and Hulu must be taking its cues from them. Apple’s recent acquisition of Lala has also spawned rumors of it morphing into a paid listening site (a la subscriptions).

I worry, though, at the prospect of all these micro-payments. When you start nickel-and-diming people, it doesn’t take long for them to pick up their bags in disgust and simply go somewhere else. And as long as there are competing sites willing and able to follow the ad revenue-only model, users will head there in droves. As with the New York Times, the added content had better be spectacular to justify the expense of subscribing.

With DVRs now almost as common as VCRs were a decade ago, watching TV shows online is not that big of a deal. Hulu merely offers me the convenience of watching an episode from work (Shhh! Don’t tell my employer!). The alternative is to simply program the DVR and watch it at home. For no additional charge. Plus, you can skip through those pesky ads.

Hulu may be trying to navigate through the final hoop to fiscal prosperity, but in the process I think they have forgotten the Pothole of Consumer Satisfaction. It is a deep one, carved out a little more every day by the constant freezing and thawing of buyer emotions.

If you’re not real careful, you may find yourself on that other road headed toward warmer climes. And it doesn’t cost anything to get in there.

Dr “Drive Carefully” Gerlich

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One response

3 02 2010
brett

What sites like Hulu and apparently, the NYT don’t get, is that if you’re going to charge for it, I can find it free elsewhere. I can stream any TV show, sporting event or anything shown on TV for free from a multitude of sites, and all it takes is a few minutes on google. Plus, it’s hard to take legal action on most of these sites because they’re based overseas.

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