Five Years Too Late

April 22, 2009

Parsing Hulu

Filed under: Uncategorized — fiveyearstoolate @ 7:35 pm
Eric Wiesen

Eric Wiesen

I am in San Francisco at the ad:tech conference today, and got up early (easy given the time change) to go hear Jason Kilar, CEO of Hulu, give his keynote address this morning. And while I enjoyed the address, I walked away feeling like we didn’t really hear a totally true story about why Hulu is enjoying so much success.

Let me state at the outset, lest the comments to follow read as “bashing” Hulu – I like Hulu as a user and am genuinely impressed with both the product and the business accomplishments Jason and his team have achieved. A lot of people looked at Hulu as a pathetic, old-media response to online video, and doomed it to failure before they even got started. Jason and his people proved the doubters wrong, and for that they are to be lauded.

Where I take issue is the narrative that he wrapped around Hulu’s success. His keynote was primarily devoted to a discussion of Hulu’s corporate culture and devotion to mission statement-like focus around some company core values. The story of how even before computers, Hulu purchased white-board wallpaper so they could continuously put ideas up on the wall to discuss, got a solid 5 minutes of treatment.

Here’s the thing – all of the above stuff is absolutely critical. You’ve got to have a great company culture. You DO have to be utterly devoted to your users. Having an information-rich, collaborative environment is great. And so from that perspective I’d encourage all entrepreneurs to follow the lessons that Jason was trying to teach. In fact, I suspect that if you heard stories from the early days of Google, Yahoo, Apple, etc… you’d hear similar stories. But where I take issue, in this case with Jason and Hulu, is that these company traits, while important and admirable, aren’t why Hulu is successful. Not really.

Hulu is successful because they have a giant, whopping competitive advantage over every other purveyor of online video – they have exclusive access to a huge volume of the absolute highest-value digital content on the web. One of the numbers Jason put up on the screen was that Hulu actually has better brand recognition post-view than TV or cable providers. But is that really so surprising? If I watch The Office on TV, maybe I remember what network I’m watching, but there are hundreds of channels on my cable system. If I watch The Office on Hulu, I’m pretty likely to remember that it was there, because it’s the only place I can go on the web to watch not just The Office, but ANY content that remotely resembles the office.

I often reference my professor Bruce Greenwald when I talk about companies and their strategy. Bruce taught me to be hyper-attentive to competitive advantages and the barriers to entry that accompany them. In Hulu’s case, the ownership structure with NBC and FOX grants them an unbelievably powerful barrier to entry – they have the content that hundreds of millions of people want to watch, and they’re the only ones who can show it on the web.

Was it a foregone conclusion that this competitive advantage would make Hulu a runaway success? No, not by a long shot. But make no mistake that Hulu had a far, far better chance of success than startups that don’t have such a massive built-in head start. There are lots of entrepreneurs out there buying white board wallpaper or having a high-integrity focus on core values. But if they have an asset protected by mile-high barriers to entry, they’re a much better bet.

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  1. […] Read the rest of this post on the original Web site Tagged: Internet, Voices, media, ad:tech, Eric Wiesen,, Hulu, Jason Kilar | permalink“”, “”); « Previous Post […]

    Pingback by Parsing Hulu | Eric Wiesen | Voices | AllThingsD — April 23, 2009 @ 3:04 am

  2. Finally, finally, someone writes a well reasoned and balanced piece on Hulu. Thank you! Kilar is a star, no doubt – but the aw-shucks-were-just-a-little-startup-that-loves-our-audience routine wears thin. You forgot to mention his $100M in funding and the $50M in media value that he gets from Fox & NBC. I couldn’t agree more with this piece…thank you.

    Comment by Thankful — April 23, 2009 @ 11:51 am

  3. While NBC, Fox and soon to be ABC back Hulu, they still heavily promote their own .com sites with the same content. Hulu has avoided the pitfalls of Joost and even to lead the pack. Granted, in the start-up digital media world, if you don’t own the content and you don’t steal it, can you really have a successful business?

    Comment by Dan — April 23, 2009 @ 8:29 pm

  4. Eric, you’ve hit the nail on the head. While Hulu does indeed provide a great viewer experience (which is why I believe it it gets more traffic than the network websites), its major competitive advantage is its access to premium content. Its revenue share to content providers is quite favorable, but unlike any other video portal, it did not have to engage in lengthy negotiations for the rights to its content.

    – A fellow CBS alum & Greenwald devotee.

    Comment by Greenwald Rules — April 23, 2009 @ 10:33 pm

  5. I just worked for a start-up with $110Mmillion and it totally tanked, so the $ doesn’t have anything to do with Hulu’s success in my opinion.

    Hulu is successful, because it is not YouTube. It doesn’t have user generated content which is the main objection for any advertiser, media buyer to put any ads on its site and ultimately why YouTube will never generate much money.

    Hulu will continue to be successful if they acquire more content and are able to engineer a way to mix+match ads with user interests. Also, refreshing ads for each video play, allowing frequent viewers to opt-out of what they don’t want to see, and opt-in to what they do.

    Comment by touche — April 24, 2009 @ 12:56 am

  6. Hulu has won the initial rush. They are / have become the verb for online video consumption. For the time being (the next 2 years) Hulu will dominate. CBS and Discovery will come crawling in order to have their content consumed on Hulu. In this game its all about the digestion of content not the ownership. While the suits argue and try and protect their “brand” the people are watching, the advertisers are spending and the press are bestowing all their glory onto Hulu.

    Better luck next time…

    Comment by BizDev — April 24, 2009 @ 11:37 am

    • I don’t necessarily disagree with this analysis. My point isn’t that Hulu won’t continue to be successful – far from it. It was merely a look into *why* Hulu is successful.

      Comment by fiveyearstoolate — April 24, 2009 @ 4:40 pm

  7. […] Read the rest of this post on the original Web site […]

    Pingback by » Parsing Hulu [Voices] True HelloWorld Story — April 29, 2009 @ 11:15 am

  8. Now they are going to start charging for HD content.

    Comment by Sam the video man — June 3, 2009 @ 8:08 pm

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