Defenestrating Thoughts from the Bivouac

Hulu is an online video-on-demand service that offers streaming video of lots of popular shows. Since Hulu is joint venture between NBC-Universal and NewsCorp (parent of Fox), it’s not surprising that the site is dominated by their content.

Hulu seems to be designed to make money on the ads that are inserted into the shows. Each “commercial break” has one 15 to 30 second ad. Though they also have a syndication model, presumably the bulk of their money does (or should) come from the in-show ads.

Hulu has a large selection of shows and until recently they would post new episodes the morning after they originally aired. I alway thought this was a great idea, they can pick up a viewers that they wouldn’t have otherwise.

People who watch the broadcast either watch it live or Tivo it . People who’d watch Hulu either missed the episode on TV, don’t have a TV (or access to one), want to watch it again, or were watching something else. So Hulu picks up audience that the live broadcast can’t get.

So the services are complementary. And since the content is paid for by the broadcast, Hulu just needs to make back operating expenses. It’s a pretty good plan.

Now let’s go back to who the target audience of Hulu is: people who missed the episode on TV, don’t have a TV, want to watch it again, or were watching something else. What did these people do in the past? A lot of them downloaded it illegally.

So Hulu also cuts down on illegal downloads and recovers some of that “lost revenue”.

Now, Hulu did something I can’t understand. The only show I watched regularly on Hulu is Battlestar Galactica. Crissy and I just get limited cable, so I can’t see the broadcasts on the SciFi network (which is owned by NBC). So, for me to see it, I have to watch at a friend’s place or rent/borrow the DVDs when they come out.

Since the show is on Friday night (seriously, what’s up with that?), I miss episodes frequently. Since the show is a serial, it’s tough to miss episodes and really annoying to watch out of order.

Now with Hulu, if I miss an episode, I can watch it online the next day. Everything is great: I get to see my show and Hulu gets to show me ads.

Just recently though, Hulu changed their policy. New episodes are now posted 8 days after the broadcast. I’m fine with a delay before the show is online, but 8 days just seems stupid: by the time an episode is posted online, the next episode has aired.

So I can never catch up! It seems like it’s in NBC’s better interest if people are watching the broadcast version, so why would they prevent me from doing this? It’s a serial! I don’t want to watch it out of order. So now I’m stuck watching it on Hulu.

Aside from being annoyed about the delay in watching my show, I don’t understand the business model.

Let’s assume that Hulu viewers are less profitable than broadcast viewers. Why 8 days instead of 1 day? Let’s look at our use cases again:

• People who missed the episode on TV - now they are going to miss all the episode broadcasts, unless they watch episodes out of order
• People who don’t have a TV - doesn’t matter what the delay is, they will never see the broadcast
• People who want to watch it again - they already watched the broadcast, so you made your money already
• People who were watching something else - still not going to get them

Now the major downside, people will start downloading it illegally again! In fact, that’s exactly what the comments on the Battlestar page on Hulu say.

What if our assumption is wrong and Hulu viewers are more profitable than broadcast viewers. If that were so, NBC would try to put content on as soon as possible following the broadcast, if not earlier. They certainly wouldn’t posted it later!

Last, let’s consider DVD sales. If NBC was worried about losing DVD sales, the time gap doesn’t make a difference. It’s solely the availability that matters. Currently, NBC only has 4 episodes posted, so that shouldn’t affect future DVD sales.

I wish I knew that the reasoning was here. My guess is that someone thinks that Hulu is cannibalizing broadcast viewership. I think this assumption is wrong; plus it’s really tough to measure, for example, how do you know that a Hulu hit isn’t someone who also saw the broadcast? After all, broadcast viewership is really tough to measure for medium- and long-tail programming.

And what about conversions? Someone may see the episode on Hulu and then start watching the broadcast.

Oh well… and please remember, I haven’t see last week’s episode yet. Don’t tell me what happened. :-)