Hulu Goes Public with Free Premium Online Video from NBC, FOX, and Many Others

| Mar 13, 2008 | Digital Home - U.S. | Competitive Intelligence Report

| Analyst: Bruce McGregor

Current Perspective: Positive/Neutral
Vendor Importance: Very High
Market Impact: High

Event Summary

March 12, 2008 -- Hulu.com has gone live and public to U.S. broadband users. The new online video Web site offers access to premium TV shows and movies in both short clips and full-length format free. Hulu is ad-driven, with integrated video ads and banners played during the streaming of a piece of content. Hulu was founded about a year ago as a joint project of NBC Universal and News Corp., and until now, it was in private beta with limited access granted to test users. Along with the main Web site, Hulu has partnered with several consumer portals including AOL, Comcast’s Fancast.com, MSN, MySpace, and Yahoo! to have embedded Hulu content run on their video portals.

Analytical Summary

• Current Perspective: Slightly positive on the launch of Hulu.com, because the new online video site provides consumers with a wealth of popular TV shows and movies from more than 50 content providers including Hulu’s founders, NBC Universal and News Corp. The biggest market driver to this new Web site is that access is free and the advertising is designed to be less intrusive than traditional TV commercials. Hulu will not be the YouTube or iTunes killer, but it offers another attractive choice for consumers to gain more access to video content.

• Vendor Importance: Very high to Hulu, because with so much pre-existing competition, Hulu has one chance to grow its business on the merits of its value proposition with instant access to premium content for no fees and few commercials. The Web site will need to prove to its advertisers that Hulu users are a suitable audience for their goods and services and that consumers do not mind the way they are exposed to advertising. In addition, Hulu needs to grow its distribution relationships with its portal partners such as AOL to help ensure its survival by branching out with the most Internet exposure possible.

• Market Impact: High on the digital home services market; since two major media companies (FOX and NBC) back Hulu, its competitors must monitor the success of this new online video Web site. Hulu has been cautious with its launch following a four-month private beta period to iron out the potential kinks and develop innovative ways to weave ads into its video streams. Online video has yet to create big profits and other companies in the space such as Apple and Google are still in the early stages of better monetizing their online video platforms. With over 60 million U.S. broadband subscribers, there is room for new companies to enter the online video space and ultimately find success through various business models.

Recommended Competitor Actions

• Just has it as effectively done with its iPhone and several versions of the iPod, Apple needs to spend its marketing dollars on educating consumers on the new benefits of watching video through iTunes Movie Rentals and the Apple TV device. Apple’s video strategy has changed significantly in the last year and consumers that might have hesitated before could be now tempted to rent movies and buy TV shows for just $1.99 through iTunes.

• Netflix should further promote to its more than 7 million DVD rental customers the advanced feature to stream movies directly off their Web site on a PC. Netflix lures more customers by not limiting the number of movies that can be watched instantly for no additional charge, with access to 6,000 movie and TV titles. Netflix needs to work quickly with LG Electronics to deliver its new device to compete with Apple TV and cables companies’ VoD services.

• ABC is still utilizing its own media player software for playing its TV programming that it has been offering on ABC.com since September 2006. Disney could benefit from more ad dollars by sharing its catalog of video on Hulu.com. Multiple Web sites offering ABC TV shows increase the chances consumers will find them.

• Google needs to preserve the existing user experience that millions enjoy with the current YouTube site, while at the same time keeping it fresh and innovative. Even with about eight hours of YouTube user-generated video content uploaded every minute, this type of content is harder to sell advertising for than professionally produced TV content. Google needs to find new ways of gaining access to more premium content and leverage its new upcoming deal with TiVo.

Recommended End User / Customer Actions

• Broadband users should try out the new Hulu.com and see if they like the user experience of free streamed content with a minimal amount of advertising mixed in. Unfortunately, this content is confined to the PC and cannot be transferred to a portable media player, TV set-top box, or cell phone.

• Residential households have an abundance of choices to access content inside the home and need to analyze their needs and budget limitations. Hulu.com is an endeavor to make popular TV shows and movies available for no cost to the consumer and an alternative to buying or renting content in downloads or DVDs. Hulu has many features similar to a DVR for a television, but with the stark difference of its inability to fast forward through commercials.

• Consumers interested in Hulu.com should have a fairly fast broadband connection of about 3 Mbps or higher to enjoy the streamed video content adequately with good picture quality.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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