nScreenMedia OTT multiscreen media analysis

Wanted: Hulu CEO. Must provide own rabbit and hat!

Filling the role of CEO at Hulu will be a major challenge now that Jason Kilar has announced he is leaving the company. His departure comes at a critical time for Hulu. But, to be fair to Kilar, there has been no time in his 5 year tenure that has not been a critical time for the company. Kilar has performed many magic tricks simply to keep the company afloat and growing in this turbulent time for mainstream TV. Rumors of his imminent departure and of the companies impending crash have been frequent and widely reported and, as it turned out, wrong.

Consider just how difficult it has been to coax and prod the three major investors in Hulu to continue to support the site by providing their content. Disney, Comcast/NBCU and News Corp (Fox) would be difficult to bring to agreement on any topic but to have managed these relationships on a daily basis for five years would have tried the patience of saint.

But now Kilar is leaving, what is the future for Hulu? The world into which Hulu was born 5 years ago was radically different from today. Having a property such as Hulu allowed the partners to experiment and learn. It also gave them time to build out their own efforts. Does it still fulfill a useful purpose today?

All three of the partners in Hulu are implementing their own online strategies quite separate from and, in some cases, duplicative of the video site.

Disney has already launched its own authenticated online service (meaning the viewer must have a PayTV subscription to watch) providing access to linear broadcast channels through the Watch Disney apps on iOS devices. As well, properties like ESPN and ABC are already heavily invested in OTT delivery through WatchESPN and the ABC Player. Likewise, FOX and NBCU provide website access and apps through device app stores to enjoy their content on video capable devices. Much of the content all three make available to viewers through Hulu is also available through their own sites and apps.

Mainstream TV providers are following a much more nuanced approach to distribution of content online today than when Hulu started 5 years ago. They are carefully balancing support for the major revenue generating engines of PayTV and advertising against the consumer’s desire to watch online TV. As well, sites like Netflix and Amazon are allowing them to realize new revenues for their library content.

So, the investors no longer need Hulu to allow them to experiment online. Is there some other value it can bring to its investors? Certainly, from the revenue perspective there does not seem to be much upside. In 2012, the site generated just $700M, a drop in the ocean when compared to the revenues driven by News Corp, Disney and Comcast from existing media outlets.

Perhaps the most valuable asset the company can provide is the Hulu Plus client. It is available on just about every connected device sporting a screen. As well, the interface is widely and rightfully praised for its ease of use.  But with just 3M subscribers this neither translates in to large subscription revenue nor large advertising exposure.

With a questionable value to its investors, the road ahead for Hulu looks to be rocky. Of course, this is nothing new for site; it has faced down such challenges in the past. But can it do so in the future without its seasoned manager at the helm?

So, let us take a moment to applaud Kilar for his efforts with Hulu. He has played a key role in the evolution of OTT TV and built one of the most popular online TV sites in the world. But as he heads for the beach for some well-earned r’n’r, is there anyone out there that can step into his role at the company and keep the site growing and the partners onboard? I, for one, am extremely doubtful.

Used by permission of The Diffusion Group

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