Hulu

Name: Hulu

Offers video content that can be streamed from its website, effectively competing with cable and satellite television providers. NBC Universal, News Corp., Walt Disney, and Providence Equity Partners each have a stake.

URL: www.hulu.com
Location: Los Angeles
Telephone: (310) 571 4700
Year Founded: 2007
Number of Employees: 160

Executive Leadership:

CEO: Jason Kilar

Bio: Bachelors in business administration and journalism and mass communication. MBA from Harvard. Prior to Hulu, Kilar worked at the Walt Disney Company in the design and development department before moving to Amazon where he rose to the position of senior vice president of worldwide application software.

CTO: Eric Feng

Bio: Bachelors in electrical engineering from the University of Texas. Prior to Hulu, Feng was the founder and CEO Mojiti, a Beijing-based video annotation service. Before that he had worked at Microsoft and Microsoft Research Asia.

Funding:

Hulu is owned by NBC Universal, News Corp, The Walt Disney Company, and Providence Equity Partners. In October 2007, Providence Equity Partners invested $100 million in Hulu.

Technology:

Hulu has a large competitive advantage in its content, with many prime time shows syndicated to the site the day after broadcast. But it is the company’s focus on ease-of-use - likely influenced by Kilar’s tenure at Amazon, a company widely known for its focus on customer experience - that has fueled widespread usage and adoption. The consumer-facing user interface of the site was developed in-house, though Adobe provides the core technology for the embedded video player, and Akamai manages the content delivery network. Hulu tests new technology publicly through its Hulu Labs section of the site, and the company is working on refining recommendation algorithms and publisher tools, as well as interface improvements to make watching video on the site closely resemble the ease of watching television. Third-parties, such as bloggers, can embed content within their own sites using Hulu’s video player, discouraging piracy and increasing traffic, sometimes dramatically as videos spread virally.

Market:

Hulu serves three major constituent groups - consumers, content providers and advertisers. From the point of view of the consumer, Hulu ostensibly competes with large video websites like YouTube, though Hulu does not offer any user-generated content. In fact, Hulu’s most salient competitors are cable companies such as Time Warner (as of press time it is not known how the purchase, by the Comcast cable company, of Hulu part-owener NBC Universal will affect Hulu especially as the regulatory review of the purchase is expected to last until at least the fourth quarter of 2010). As cable subscriptions decline, such companies will become more aggressive in courting the web audience and more protective of their deals with content providers. Advertisers are drawn to Hulu, especially over other video sites, because of both the premium content offering and the relatively low ad loads (most videos on Hulu have only a handful of ad breaks, of 30 seconds each).

Strategy:

Hulu hopes to become the central hub for premium content on the web. By encouraging viral spreading of the Hulu player outside of the site, they are building brand recognition and facilitating the spread of content. As an aggregator, they continue to strike distribution deals with contest creators and give consumers a more robust selection of premium content than any close competitor. A more long-term strategic objective seems to be to become an early market leader in the premium content web market so that, should cable operators become more aggressive with their Internet strategies, (through products like the TV Everywhere Internet service or otherwise) Hulu will already have a clear dominance and large audience. TV watching habits are slowly moving away from the television and toward the web, and Hulu has positioned itself at the center of the potential transition.

Challenges and Next Steps:

Hulu has a few main near-term challenges: how the potential introduction of a subscription fee will impact their user base, continued acquisition of premium content, and the emergence of the “TV Everywhere” system from cable operators such as Comcast and Time Warner. The “TV Everywhere” system - which would allow cable subscribers to access television content on the web - does pose a challenge to Hulu’s dominance in the premium-content space, though no release date has been provided for the first versions of TV Everywhere. Introducing a subscription component to their product would likely cause Hulu’s audience to decline steeply, at least initially. This would then negatively impact their ad revenues, which are currently billed on a CPM (cost per thousand) basis. Hulu must continue to acquire premium content in order to sustain its audience.

Compiled by Amanda Peyton