Poor Hulu – it never had a chance. Not that anything has happened to the popular but troubled TV like web site as yet, but the writing is on the wall and in a way, it always was. You see, Hulu was a grand experiment by the studios. They needed a way to test the business models for delivering their content via the Internet. It was safest to do this under a unique brand name. After all, they didn’t really know what they were doing, so chance of failure was high. Best instead to invest some money and spin up a proxy that can test a few options. If failure occurred you wash your hands of it. Even better, join forces with a few other studios so that the whole experiment doesn’t cost any single studio too much (again, that’s too much in the scheme of things). And so Hulu was born.
The thing is, Hulu didn’t fail. While it might not have been a wild run away success, it certainly hasn’t failed. Instead its made ad deals, pulled in actual paying subscribers, and its been the talk of analysts, customers, and the public at large in general. It is constantly compared to Netflix, which is the largest pool of subscribers so at some point, unless it really screws up, its highly likely to strike that even balance that allows for positive public opinion AND a revenue generating business model that really does allow it to take off. And that ultimately is Hulu’s problem.
Hulu wasn’t supposed to succeed – at least not to that point. Remember, it was a test – a toe dipped in the water by the big boys. And now that they’ve seen what people like and they don’t, those content backers have decided its time they go there separate ways and develop their own brand for delivering the same business. And with that decision made, that is why its time for them to sell Hulu. They are ready to kick that little bird out of the nest – it’s the practice round and now its time for the real deal, as far as they are concerned.
But what happens to Hulu? It’s a fairly valuable property, but it’s got a major weakness. It is dependent on those very sellers for its food. The content that is licensed to them for viewing is what keeps the crowds coming back. So the site, while popular, will only remain so as long as that content keeps flowing. To be sure, the sale of the company will come with a license deal, but there will be a giant countdown clock above that deal. Whether its 2 years or 5 years or something in between, that’s how long Hulu and its new owner will have to do something with the property. And as much as I’d like to believe they will grow the property into something strong enough and profitable enough to renew those contracts when the time comes, I don’t believe it’ll go down that way. No, that giant countdown clock is like the a death watch, counting down the time Hulu has left before it is finished for good.
So who buys Hulu? With this perspective on how the sale might go down long term, the acquisition is likely one of desperation for the buyer. It’s either a totally new company in the market looking to make a splash and get some name recognition, or it’s a company already in the market, but flailing and hoping to prop itself up with the cache Hulu offers. That makes a purchase by an AOL or a Yahoo! much more likely in my mind than an Apple or Netflix, but its even a hard sell for the likes of them, given how high the price tag may be.
While there is no real timeline in place yet, it does seem obvious that by the end of the year, a deal, whether announced or not, will likely be in place sealing Hulu’s fate. And like I said, it’s a shame really, as you can tell Jason Kular and the other team members there want to succeed – and have come damn close – despite that being something there weren’t really supposed to accomplish.