
Hulu Struggles To Survive The Influence Of Its Parent Companies - Jaigus
http://www.fastcompany.com/3001736/hulu-struggles-survive-influence-its-parent-companies?utm_source
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surrealize
It's a little disappointing that we're even having this conversation at all.
Online content should be so much more valuable than broadcast content, both to
consumers and advertisers. And yet, online is still the red-headed stepchild.

Online content can target ads _individually_! I've filled out the survey on
Hulu, they know that I'm a guy, my age, etc. They probably have pretty good
guesses about my income and my interests. The full set of shows that I watch
paints a pretty detailed picture of who I am and what I like. In an ideal
world, they could use that information to show me very precisely targeted ads.

That famous quote, "Half the money I spend on advertising is wasted; the
trouble is I don't know which half." is probably mostly right, except I'd bet
that it's a lot more than half that gets wasted. And Hulu should have the
ability to fix that, by individually targeting ads! But they're still showing
me, a fairly nerdy guy, lots of Febreze ads and Glade sense & spray ads and
even the occasional tampon ad or whatever.

Google is proof that precisely targeted ads are really, really valuable. And I
think targeting ads well even makes them less annoying; if you're showing me
something that's actually relevant to me, I feel less like my time is being
wasted. But Hulu and its advertisers still haven't figured out how to match up
ads and users.

It's sad. But whoever actually solves this problem will make oodles of money.

~~~
chaz
The major difference is ad load. Watch a 1-hour show on Hulu, and you'll see
that the content is typically ~42 minutes long. Which means that on-air, it's
18 minutes of ads that fill the balance. But online is showing way less ads
than 18 minutes. Even with 4-5 ad breaks, you're watching, at most 2 30-second
ads per break. In online streaming, revenue per ad (CPM) is competitive with
TV, but revenue per viewer is much lower.

Also, targeted advertising isn't a panacea. I agree it can be better, but if
you're a big brand spender like McDonald's, Nike or Target, you're targeting
just about everyone. Gender, age, income, and interests matter a whole lot
less.

~~~
dangrossman
Not that it makes up the whole difference, but Hulu shows about twice as many
ads as you're saying. The typical hour-long show has 4-6 ad slots (including
beginning and end), and they average 60-120 seconds (with a rare ad group over
2 minutes), not 30-60.

<http://i.imgur.com/ZnB3Q.png>

There are fewer ads on shorter shows, and even fewer on clips, but it's still
not what it as sparse as when Hulu first came out.

~~~
chaz
You're right -- thanks. They've been slowly increasing their ad load every
year since they've launched, and it looks like they're doing three ads in a
break now for some shows.

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w1ntermute
It's astonishing how difficult it is for content companies to get this right.
Torrent sites have had it down for more than half a decade. I started using
private torrent sites to obtain TV shows more than 6 years ago, and even
though very little has changed in a substantial way since then (excepting the
rise of Project Gazelle), the process is great. You can download _any_ show,
_any_ time you want after the show has been released (+15 to 20 minutes), with
_no_ restrictions. I find it ridiculous that this is still an issue in _2012_.

~~~
lukifer
You don't get paid for the value you produce, you get paid for the value you
can withhold. The DRM capabilities of Flash, Silverlight, iOS, etc. are the
only reason that Hulu and Netflix stay in business; torrents are fantastic,
but in a free-info model, there's nothing to withhold and no way to get paid.
Embedded commercials would get immediately edited out, and product placement
only goes so far.

I don't like the situation either, but without a new business model (or a new
economic system), we're stuck with what we have. (Most) video content is
insanely expensive to produce, and physical disc sales continue to decline.

~~~
w1ntermute
> The DRM capabilities of Flash, Silverlight, iOS, etc. are the only reason
> that Hulu and Netflix stay in business; torrents are fantastic, but in a
> free-info model, there's nothing to withhold and no way to get paid.
> Embedded commercials would get immediately edited out, and product placement
> only goes so far.

How is this any different from the situation right now with DVDs and Blu-rays?
You can copy videos very easily. And what about torrents? If people wanted to
download and copy files, they could do that with torrents. But instead, the
people who actually _bother_ to pay for the movies and TV shows are punished.

And this same argument could be applied to music stores, but Amazon and iTunes
operate without DRM, and there are no issues there. A lot of pro-DRM people
said the iTunes store would collapse without DRM, but things seem to be
working just fine for them. We've been through this _exact_ same argument half
a decade ago with music. The only reason it's being repeated is being the old
farts in charge of the media companies are too shortsighted to see what will
benefit their companies in the long term.

~~~
lukifer
I didn't mean to imply that DRM-free video stores can't work; I meant that (a)
torrents themselves are nigh-impossible to monetize, and (b) suits at Big
Content will never feel comfortable with opening up their precious data, even
though you and I know that the raw data exists already.

Though millions are sometimes spent to market music, that's peanuts compared
to the costs of producing movies and television, and that money won't get
spent without some confidence that it can be recouped. It's one thing for
Louis CK to gamble $0.2M on a DRM-free standup special, and another for Disney
to gamble $220M on a DRM-free Avengers.

> How is this any different from the situation right now with DVDs and Blu-
> rays? You can copy videos very easily.

Nerds can, but DVD ripping is still much less friendly to regular people
compared to MP3 swapping, and requires much more work to play back compared to
iPods and CD burning. If the industry ever got behind open standards,
eventually many more people would pirate movies instead of just college kids.
Borrowing a DVD from a friend would be no different than taking it
permanently, resulting in fewer total sales.

Don't get me wrong: DRM is a plague. Hell, I'd even support a tax that made
all content part of a universal digital library, with funds distributed
proportionally to usage. But without somehow creating a new economic system
for digital content, every "rational actor" is going to do whatever they can
to maintain maximum leverage. The only reason the RIAA caved was that the
damage was already done, and they had lost most of their leverage already.
(Also, it was something of a ploy to give Amazon an advantage over iTunes,
which was enjoying a brief hegemony over paid music downloads; user freedom
was a happy side effect.)

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GBKS
Since the article mentions the site redesign, I think this new design is not
going to work out for them. The information density is too low, resulting in
the site feeling empty and making it less interesting to browse around. I
think they'll lose a lot of casual viewers because of this. My assessment may
be wrong and I am curious to see how this plays out.

~~~
NathanKP
Just to offer the opposite opinion, as a frequent user of Hulu I love the new
redesign. To me it has less of the useless stuff and more of the useful stuff
immediately available.

The new front page has helped me discover many new shows that I wouldn't have
found any other way

Additionally the new design feels much faster and more responsive. If given a
choice I would not go back to the old design.

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bmelton
I am routinely baffled at some of the choices content-holders make regarding
not just Hulu, but on-demand availability of their content.

I remember when I first began watching "Shameless" on Showtime. I had missed
pretty much the entire season before somebody recommended it to me. I found it
on Verizon's "On-Demand" and watched a couple episodes, loved it, then came
back the next day to find out that all the episodes had been pulled off of On
Demand for a few months.

I can only assume it was pulled to keep from scavenging DVD sales or something
like that, but at that time, I hadn't watched enough to build up a love for
the show that would have persuaded me to buy a DVD.

I work from home, so I will often put TV shows on that I can mindlessly watch
while I'm working. This generally excludes shows that require lots of
attention, but most prime-time shows are pretty digestible with only a modicum
of attention required.

All too often, despite having all channels on FIOS, Netflix, Hulu Plus et al,
I find that I can't watch the first season of a new show that looked
interesting.

You should _always_ give away at least the first few episodes so that I can
get hooked. I don't have a problem with releasing the episodes the day after,
or even a week late... but don't deny me the ability to fall in love with your
show by only showing me the past few episodes, unless your show is only into
its fifth episode of the first season.

~~~
ChuckMcM
I share your amazement but at Teller (of Penn & Teller) said in one of his
interviews, "People only believe what they are prepared to believe." Over the
years I've discovered that while this makes a lot of magic tricks possible, it
also profoundly affects how people react to environmental changes.

Whether its executives at a large content conglomerate debating the economics
of content or parents at a school debating the validity of the scientific
method, if someone is given a choice of what to believe, and one choice would
violate some other deeply held belief, they always choose to believe the
explanation that doesn't challenge the status quo. Regardless of how
ridiculous it might seem to a neutral third party observer.

This mis-feature in the human brain seems to cause a lot of trouble.

The deeply held belief that I have heard expressed by many different big
content holders is that the 'true value' of a work can only realized by
keeping absolute control over the use of that work. Thus they work to maintain
absolute control by technology, by regulation, and by the force of law.

~~~
sparky
Our tendency to minimize cognitive dissonance has a lot of terrible
consequences, but the Wikipedia article points out a few ways besides magic
tricks that we can exploit it for good:
[http://en.wikipedia.org/wiki/Cognitive_dissonance#Applicatio...](http://en.wikipedia.org/wiki/Cognitive_dissonance#Applications_of_cognitive_dissonance_research)

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andyl
I worked for a streaming media startup that partnered with old-line media
parents. Parents killing their new-media spawn is by now well-established
practice, and nobody should be surprised about the struggles of Hulu.

The media giants depend on their existing distribution partners - cable
companies, DVD sales and theatrical. They aren't going to put these channels
at risk. Streaming media won't be first-class until a new streaming-centric
content power emerges, or until the strength of cable is broken.

Eventually the transition will happen. But when. In our lifetime? Not sure.

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nitrogen
How streaming _should_ work in 2012: a provider-agnostic protocol allows any
video producer to place content online, either for streaming or download.
There are no codec wars or patent issues. Digital video "warehouses" collect
all these sources of video, providing bandwidth and an open API for purchasing
streaming and/or download rights to a video, with a simple algorithmic pricing
structure. Frontend websites and applications then compete for user attention,
mixing and matching video from any source they please, with the only
requirement that they pay the streaming rate to the video aggregator. Any
video, any time, with any UI.

Instead we have ever-increasing ad durations, limited episode selection,
proprietary players with _terrible_ video quality (e.g. some of them use
nearest neighbor scaling in fullscreen, there's no vsync so there's massive
tearing and jitter, the latest versions of Flash for Linux and YouTube swap
the red and blue color channels, etc.). Television as a medium is broken, IMO:
advertisements are timed to start right at the point your mind starts to get
absorbed into a show, causing frustration and a desire to change channels or
close the tab.

~~~
lukifer
> simple algorithmic pricing structure

I'm completely on board with everything you're saying, but algorithmic pricing
is non-trivial; were it to be achieved, it would fundamentally rewrite the
rules of economics as we know it.

Prices aren't decided by value or fairness, but by negotiating leverage. If
Mad Men knows they're in high demand, they ask a high price or walk; if
Netflix knows that a horror B-movie is in low demand, they offer a low price
or walk.

Getting content owners to cede their negotiating power in either case to a
universal formula will be nigh-impossible without fundamentally rewriting IP
law (which for the record, I am enthusiastically in favor of).

~~~
nitrogen
It is my opinion that in an ideal world (ideal as in, most pleasant for humans
to inhabit), pricing of video would be constant, and high demand would be its
own reward through higher sales volume.

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tylermenezes
> Hulu ... $600 million this year

> TV still generates more than $70 billion ... viewership is down 12.5%

I can totally understand their decision here. Hulu cost them 9b in revenue,
and only returned 600m.

(Whether this drop is actually because of Hulu or not is more at issue, but I
can see them thinking it is.)

~~~
jimbobob
Just curious... where are you getting the $9B number from?

~~~
dsk2012
Looks like 70*0.125

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twodayslate
They need to make Hulu Plus more appealing. I am currently subscribed to it
but I have no reason to resubscribe. I can't find any of the shows or movies I
want to watch on it that aren't already on Netflix.

~~~
fossuser
I hate hulu plus.

If I'm paying a monthly fee for something I don't want to have to sit through
an enormous amount of advertising. This is doubly true online when it's
trivial to get it a higher quality version without advertising for free. I'm
happy to pay the monthly fee for the convenience of advertisement free
streaming (which is why I love netflix and spotify), but it's insulting to pay
to watch advertising (and even more so when you also have a cable
subscription).

All hulu plus does is what cable tv should have started doing years ago which
is let you watch all shows on demand, it fixes nothing else and charges too
much for that obvious privilege. The way the introduced ads also bothered me
and reminded me of how the cable networks brought them in (initially cable tv
had no advertising which is one of the reasons you paid for it).

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Aron
So how much could Netflix pull in with ads? They streamed a billion hours in
June, so if it was one ad per half-hour (on average), at 30$ CPM does that
imply 60M$\month? That's a serious amount of money.

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pandaman
I used to be a Hulu+ subscriber until they introduced the "brain-spray
awesome" experience last month. Now I am not a subscriber and since there is
no free Hulu to watch on TV - not even a customer.

They took away the ability to add an entire show to queue and the
notifications of the new episodes in the shows in your queue among many other
things. I am not sure who thought the removal of these features is somehow
making the service better but I would be really surprised if it were its
parent companies. Seeing how the company spends money to cripple whatever UX
it had before and lose customers I imagine Hulu has much bigger problems than
the influence of its parent companies.

~~~
dangrossman
They didn't take that away. You just click the favorite button on the show's
page. Updates to that show are added to your queue. All that changed is the
name (Favorite instead of Add to Queue).

~~~
pandaman
"Updates to that show are added to your queue" != "all show episodes are added
to your queue". There used to be a choice: "subscribe to new episodes" and
"subscribe to all episodes" now there is not and it's "subscribe to new
episodes" only.

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Spooky23
Media companies suck. CBS now delays start times by 2 minutes to break DVRs.
And certain shows (ie person of interest) don't exist legally on the Internet.

What do they expect people to do?

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emperorcezar
The big corporate egos can't step aside and allow a business to be successful.

