Case | HBS Case Collection | October 2009 (Revised June 2010)
Hulu: An Evil Plot to Destroy the World?
by Anita Elberse and Sunil Gupta
In July 2009, Jason Kilar, the chief executive officer of Hulu, is debating whether the online video aggregator should move away from a purely advertising-supported model, and whether it should participate in an industry-wide initiative to develop and test "authentication" technology that can facilitate a subscription or pay-per-view model. The case traces the early years of Hulu, a joint venture between News Corp. and NBC Universal, that was initially met with strong skepticism but quickly became on the most celebrated and popular online video business. Provides in-depth information on how the company serves content owners, users, and advertisers. Describes the online video space in considerable detail, also covering economic and viewership statistics that enable a rich discussion of viable business models.
Keywords: Advertising; Business Model; Television Entertainment; Distribution Channels; Service Operations; Internet; Online Technology; Media and Broadcasting Industry; Motion Pictures and Video Industry;
If you any doubts about how the mainstream media is playing us, then here’s the proof that they indeed are. It’s easy to see when you take a look at Hulu. Most of the uniformed world think FOX (News Corp.) and NBC/GE are “enemies” but we see that they’re working together to suck the air out of independent media content available on the web.
Hulu–“An evil plot to destroy the world.” I didn’t originate this description; Hulu did. It’s in their ad which features the obnoxious Denis Leary jabbering away about TV content turning your mind to mush and snarking at a “brain dead” (those are the ad’s words) geek who’s getting a stream of green stuff passed into his ear. Before he’s through, Leary says that the folks at Hulu are “aliens” and then winds up with the tag line, “Hulu…an evil plot to destroy the world…Enjoy.”
The ad is up at the company blog under the title “The Evil Plot Continues.” Go see for yourself…(and be sure to “click” to see the full ad after the initial clip is over or click here for the video without the blog post.). This week, Hulu has released a “Video Panel widget”:
To continue to deliver on our mission to connect audiences with their favorite content wherever they are — or, as Denis Leary would say, on their “bliggety blogs, facey spaces and tweety pages” — we are releasing a new embeddable product this week: the Video Panel widget.
The ad is supposed to be a cool joke aimed at the younger crowd, but in reality, it may not just a joke! A couple of weeks ago I happened to be watching CNBC and caught an interview with the young CEO who was talking about how successful Hulu had become and how it would be even more successful as it closes in on YouTube, which is currently the top video site.
And who’s behind Hulu? According to Hoovers (with my bolding):
Hulu Company Description
When the rich and famous name their offspring, anything is possible. NBC and FOX had a digital baby. And they called it Hulu. Initially formed as a joint venture between NBC Universal (a unit of GE) and News Corp. (the parent of FOX), Hulu.com is a video site that features video from more than 100 content providers. Offerings include TV shows from FOX and NBC, as well as from subsidiary cable channels such as Bravo and the SCI FI Channel. Hulu also shows films from studios including Sony and MGM. Content — all total, some 900 TV series and full-length movies– is streamed on demand, free of charge the day after its broadcast debut. After a nearly five-month long beta version, Hulu.com was launched in 2008.
And, there’s another player now: Disney/ABC.
Disney Buys Into Hulu. YouTube Should Be Worried. (4/30)
As the initial exclusivity for NBC and Fox content expires, Hulu will be adding Disney/ABC videos and TV shows to its distribution mix as well. Hulu is becoming the preferred distribution channel for the big media companies.And it is succeeding in attracting the fickle Web audience. This should worry YouTube, which is still casting about for a business model that will pay for its enormous storage and bandwidth costs.The media companies cannot ignore YouTube just yet, but by strengthening Hulu they can give it their best content first.
A couple of days earlier, this article provided some extra background:
Hulu Now The Number Three U.S. Web Video Site. Soon To Be Number Two. (4/28)
Just last month, we wrote that Hulu had gained some 10 million viewers to become the fourth largest video portal on the web. Now, it’s slain another rival to the list: Yahoo, to move into #3 — at least in terms of videos viewed.
To be clear, the new March U.S. numbers released by comScore show that Hulu is still slightly behind Yahoo’s video properties when it comes to unique viewers. But the NBC and Fox-backed Hulu should pass it any day now in that category as well. Meanwhile, the number two player, Fox Interactive Media (which runs MySpace), is slipping just as quickly as Hulu is rising in videos viewed. It could well be as soon as this month when Hulu moves into the number two web video position.
Needless to say, I wondered about the name. Silly me for thinking it was a take-off on “hula” or something Hawaiian. NOOOOOOOOOO, it’s actually a Chinese name! From Wikipedia:
The name Hulu comes from two Mandarin Chinese words, hulu (simplified Chinese: 葫芦; traditional Chinese: 葫蘆; pinyin: húlú; Wade-Giles: hu-lu) “calabash, bottle gourd” and hulu (simplified Chinese: 互录; traditional Chinese: 互錄; pinyin: hùlù; Wade-Giles: hu-lu) “interactive recording.”
The company blog explains:
In Mandarin, Hulu has two interesting meanings, each highly relevant to our mission. The primary meaning interested us because it is used in an ancient Chinese proverb that describes the hulu as the holder of precious things. It literally translates to “gourd,” and in ancient times, the hulu was hollowed out and used to hold precious things. The secondary meaning is “interactive recording.” We saw both definitions as appropriate bookends and highly relevant to the mission of Hulu. 
(Here’s the link to the above-mentioned blog post at Hulu with a picture of the young group (mostly of Chinese background?) who worked on choosing the name: http://blog.hulu.com/2008/05/13/meaning-of-hulu/.) (Note: For all their care, it seems that “Hulu” has some unusual meanings in other languages anyway. For a sampling, see: Hulu Translates To “Cease” and “Desist” in Swahili. Oops.)
My next stop was a visit to the Hulu site at http://www.hulu.com/. The “News” channel has a few sub-sections, but I just looked at the Politics section closely. Of course, it varies day to day, but it certainly is NOT a comprehensive news site…an awful lot of clips featuring unchallenged spin from the Administration and cable talk shows on the day I looked. Hulu is entirely commercial content, so you won’t see any original “ads” or political discourse from the peons here, like you see at YouTube.
Who’s running Hulu for NBC, FOX, and Disney?
The CEO is one Jason Kilar. From Business Week:
Jason Kilar serves as Chief Executive Officer of Hulu, LLC. Mr. Kilar has been Chief Executive of online video joint venture of NBC Universal, Inc. and News Corp., since July 9, 2007. He serves as Special Advisor of KBL Acquisition Corp. IV*. He served as Senior Vice President of Worldwide Application Software at Amazon.com Inc. since May 2003 and was responsible for Amazon’s Marketplace business. From February 2002 to May 2003, Mr. Kilar served as Vice President of Worldwide … Application Software of Amazon.com Inc., where he joined in May, 1997 as a Product Manager. From October 2001 to February 2002, Mr. Kilar served as Vice President of Marketplace of Amazon.com Inc. and served as its Vice President of Books, Music, and Video & DVD from February 2001 to October 2001 and serves as its Vice President. He began his career with The Walt Disney Company, where he worked for Disney Design & Development. He serves on the board of Management Leadership for Tomorrow. He has been Director of AdReady, Inc. since November 28, 2007. Mr. Kilar received his M.B.A. from Harvard Business School…
The company is providing investment capital for Hulu is Providence Equity. Of course, there’s a “global presence”:
Working collaboratively from offices in Providence, New York, London, Hong Kong and New Delhi, our 74 investment professionals pursue opportunities as a unified team across North America, Europe and Asia Pacific. Our sector focus and international mandate enable us to dedicate our full resources to building global leaders in the media, entertainment, communications and information industries, regardless of location.
The large “team” running this firm has some interesting names on the roster.
Michael K. Powell, now a Sr. Advisor for PE, formerly FCC chairman during the Bush Administration
In addition to Kilar, there are a lot of people with Harvard ties, work history with some of the large investment banks (with a number of them with a history at Morgan Stanley), and other interesting backgrounds. Here’s a sampling of some of the names I peeked at…there are many others with similiar ties on the long list of “the team”:
- Chief Compliance Officer Fred Franklin (who “served for ten years as Assistant Director of the U.S. Securities and Exchange Commission’s Division of Enforcement”)… from Bear Stearns
So, it looks like the total capture of the minds of the younger generation by the mass media will be complete if most of them gravitate to Hulu. If YouTube can’t survive, will the creative video we see there dry up or become fragmented across many smaller sites?
Hulu is just another piece of the puzzle as the media “clamps down” to control what media content users see. Scary, very scary indeed.
*KBL Acquisition Corp. IV is involved in “miscellaneous” investment services but is a big player in the healthcare industry (also KBL I, II, III)
Hulu Company Profile.
GE media holdings (From Columbia Journalism Review site)
News Corp. media holdings (From Columbia Journalism Review site)
Disney media holdings (corporate site)
Filed under: Current Politics | Tagged: ABC, Bear Stearns, Brown University, Business Week, CNBC, comScore, Denis Leary, Disney Corporation, FOX, Fox Interactive Media, General Electric, Goldman Sachs, Harvard Business School, Hoovers, Hulu, investment banks, J.P. Morgan, Jason Kilar, KBL Acquisition Corp., Lehman Brothers, mainstream media, Mandaring Chinese, mass media, Merrill Lynch, Michael K. Powell former FCC Chairman, Morgan Stanley, MySpace, NBC, News Corp., Providence Equity, Prudential, The World Bank, U.s. Securities and Exchange Commission, video content websites, YouTube |