Why Hulu Has the Advantage

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In March of 2007, before Hulu existed and about a week before Viacom filed a US$1 billion lawsuit against Google and YouTube over alleged copyright violations, I theorized on my personal blog that YouTube was jumping the shark and would likely morph into a video blogging platform, rather than the future of television, which is the type of thing Google talked about when they acquired YouTube for $1.6 billion in 2006. Google said that acquiring YouTube would lead to “new opportunities for professional content owners to distribute their work to reach a vast new audience.” The acquisition was supposed to lead to more commercial content deals.

So far neither future has quite come true, and the post on my personal blog has been lost to the ether.

A follow on post from a month later (April 2007), is still available at Archive.org, though. In that post, I predicted that, “YouTube will not be a replacement for TV, and it will not be the place to go for finding every video on the web or for watching commercial content. Rather, when Google bought YouTube they bought a video complement to Blogger, their other blogging property. YouTube already offers users the tools to make their own channels, present videos in sequential order, with comments, video responses, subscriptions, and other social features — the skeleton of a powerful video blogging platform. It would be wise for Google to get on board with this and build out YouTube’s video blogging tools even further to match their unrivaled distribution capabilities.”

The problem with that theory, of course, is that user generated content is much harder to monetize than commercial content. When paired with the speech to text recognition technology that Google is working on, however, it could potentially be a lot easier to sell advertising around.

Two years later, my prediction hasn’t come true, but the landscape of online video has also changed dramatically. Hulu, the joint venture between NBC and Fox, is now a top ten video site and one of the fastest growing on the Internet. Though YouTube is still many times larger than Hulu, the trend appears to be in Hulu’s favor — the content people want to watch most is the commercially created stuff that Hulu has a license to stream.

That’s an idea that was confirmed today in an article by Hitwise GM Bill Tancer. “Of the top 20 search terms entered into YouTube’s site search, 15 were seeking broadcast and cable television content in the form of music videos, movie trailers and episodes of “Family Guy,” a Fox animated sitcom, content that Hulu has license to stream. YouTube often carries similar clips, but without a content license they are subject to removal based on the content owner’s request,” writes Tancer.

In other words, YouTube is still good for the occasional dramatic prairie dog, but the types of things that people really want to watch is the stuff that can only be found on sites like Hulu and the recently launched TheWB.com. Which, as I said, is also the easiest type of video content to monetize. In July of last year, Silicon Alley Insider estimated that Hulu would make about that same amount of money in its first year in business as YouTube was expected to make in its fourth. That’s pretty impressive given the differences in scale and age.

For YouTube, which hasn’t had too much luck in signing licensing deals for the type of commercial content people crave, the future may look a lot like the one I predicted two years ago — a destination for user generated content in the same mold as Blogger. Or, it could look something like the recently relaunched TV.com, which mixes content from parent company CBS with embedded content from Hulu.

In September we wrote that the future of television itself may begin to look a lot like Hulu. YouTube, on the other hand, though initially built on the back of commercial content (generally uploaded by users without license to do so), more likely has a future akin to their “Broadcast Yourself” slogan as a video blogging platform.

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  • jwalker37

    I hope there are more Hulus around the corner. Due to licensing restrictions, it’s hard to imagine any service gaining a hegemonic hold on the video market. Still, as long as Google is the big dog, and serves up YouTube results, YouTube will dominate…as frustrating as it can be.

  • @arcwhite

    Honestly, Hulu is going to remain something of a video backwater until they accept that the Internet is geography-free, and license their content accordingly. The number of times I’ve been linked to a Hulu video only to be told that “this content is not available in your region”… grrr.

    (And yes, I could use an SSH tunnel to get around this without about 30s of effort. However, I don’t want to – it should Just Work!)

  • Valerie Shipbaugh

    Hulu has great quality and a nice layout that Yahoo just doesn’t have. Great article!