Setting Hulu free will give it best chance to fly

June 22, 2011

By Jeffrey Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Hulu needs to be free of its hoops. Media titans NBC Universal, Walt Disney and News Corp have given the online TV service a good running start. But their ownership creates conflicts that will retard Hulu’s growth. An analogy can be found in banking, where Visa and MasterCard have flourished since being granted independence. An unsolicited approach for Hulu creates a perfect opportunity to find it a better home.

Hulu has defied early skeptics that old-school media companies could collaborate to create a successful service for a new generation of TV watchers. The firm said last year it was profitable and now expects to generate $500 million of mostly advertising revenue with 1 million paying subscribers this year. Nielsen reported that viewers on average watched nearly five hours of Hulu last month, more than any online video site including YouTube. Netflix was omitted from the survey.

But joint ventures have a knack for degenerating. Hulu already has shown signs of strain. Its two executive champions at News Corp and NBC are gone. Hulu boss Jason Kilar even went so far as to criticize the ways of his corporate overlords in a February blog post.

And when Comcast bought NBCU, trustbusters stripped it of any say on how Hulu is run. America’s biggest cable operator is also aggressively pushing its own popular on-demand services and making it easier for subscribers to watch programs on mobile devices. What’s more, as networks seek higher fees from cable and satellite companies, Hulu’s presence is increasingly a sticky point in the negotiations.

Setting Hulu free now would help it escape any further internal squabbling and could enable it to scale new heights. That was certainly the case for the two major credit card networks once they were cut loose by their financial institution masters. Since its initial public offering five years ago, shares of MasterCard have soared by 500 percent. And Visa’s annual operating income has nearly quadrupled since it debuted in 2008.

Under new ownership, Hulu will still be in thrall to the major media companies. Like Netflix and other online programming distributors, it must pay for the rights to content. In the right hands, though, Hulu stands a better chance of becoming a fixture of the inevitable online video oligopoly.

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Free Hulu has become a pathetic skeleton of what it was a year ago. The variety of TV programming has tanked unless you count shows the studios are trying to force feed the public like the animes and the high school trash. I guess people might eventually watch their favorite 20 or so movies from the archives and that attempt at pseudo-variety will show some slow death. Basically, if Hulu stays on the track it’s on now it will be dead in a couple years which is probably where Newscorp and NBC wanted it to end up. Way to go Rupert!

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