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.