hulu: An Evil Plot to Destroy the World

GROUP 4 SALES & DISTRIBUTION MANAGEMENT

 BRIEF OVERVIEW

1 US TV Industry & Major Players

hulu Case

What is the Market size? Who are the top cable operators, studios &
broadcast networks? What is the industry wide “TV Everywhere”
initiative?

2 Hulu’s Value Proposition

How does Hulu’s value proposition differ from that of traditional broadcast and
cable television? And how does it differ from that of YouTube? What explains its
success to date?

3 Hulu’s Stakeholders
How does Hulu serve content owners, users and advertisers? Do the needs of
these customer groups converge?
SALES & DISTRIBUTION MANAGEMENT

4 Broadcasters’ Approach
The different broadcasters-ABC, CBS, NBC, FOX and the CW—have each
chosen a different approach to the Internet. Which strategy is preferred?

5 Underlying Economies
What are underlying economies of Hulu & that of broadcast & cable television? Specially,
how do the revenues per hour-long program compare across television & Hulu?

6 Revamping Hulu’s Model

Should Kilar move Hulu away from a pure advertising-supported model? If so, what is the
preferred new model?
U.S. TV INDUSTRY
MARKET SIZE BROADCAST NETWORKS
110 million owned a television
Five Primary Networks: Disney’s ABC,
64 million subscribed to basic cable
CBS, FOX, NBC and CW
41 million subscribed to premium digital cable
40 million to high-speed internet service
$90 billion generated in annual revenues

REVENUE STREAMS
Advertising Sales, National Advertising
CABLE OPERATORS
Spots and License Fees
One cable operator per geographic market
Major players accounted for 75% subscriber
base and 80% revenues
• Comcast (Largest - 24 million subs)
• Times Warner Cable (15 million subs) ADVERTISERS
• Cox Communications (5 million subs)
$60 billion annual advertising
• Charter Communications
revenue
$25 billion (English language market)
Players: ABC, CBS, FOX and NBC
Advertising rates (CPM)
STUDIOS & PRODUCTION CO.
• $20-$40 for short prime-time ads,
20th Century Fox, Disney, Universal,
on major broadcast networks
Warner Bros & Independent
• $15-$25 for original and longer ads
Companies
on cable networks
 TV EVERYWHERE
"At least 92% of Americans qualify to watch this for free online”
-Jeff Bewkes, Time Warner's chairman & CEO
hulu Case

In June 2009, Comcast and Time Warner formally

announced they would introduce an initiative, "TV
Everywhere“

Enable consumers with a pay-television

subscription via a cable, satellite or telecom
provider to view premium content online through
SALES & DISTRIBUTION MANAGEMENT

authentication

MAJOR ENROLLMENTS
MITIGATE ONLINE FEAR
HBO, Starz, Cinemax, TNT, TBS and
Comcast This is a way to extend the television economics online

The initiative was open and non- Content would be streamed and contain an advertising load
exclusive: cable, satellite or telecom much like cable television.
operators were free to enter into similar
agreements with content providers Television content providers who till date avoided online video
sites due to security concerns and because they didn't like the
model could try out TV Everywhere model
ABOUT hulu

hulu Case
• Joint venture between media giants NBC Universal & News
Corp in 2007. In 2009, Disney began to offer shows from its
popular broadcasting network ABC and its cable networks

• Premium online aggregator of premium video content with

over 40 million unique viewers by 2009

• Jason Kilar, CEO of hulu described their objective as being

"focused on helping users to find and enjoy the world's
premium, professionally produced content when, where

SALES & DISTRIBUTION MANAGEMENT

and how they want it.“

• As of July 2009, Hulu employed 140 people across four

offices in Los Angeles, New York, Beijing and Chicago

• The company has three main groups of customers -

Content Owners, Content Users & Advertisers
VALUE CREATION FOR HULU USERS

PRODUCT MODEL EASE OF USAGE

Hulu was completely free to users. You
Streaming videos using only a web
had to create an account (provide basic
browser. No special player or plug-in.
personal details) to view content
Free of clutter and intuitive. Featured
intended for mature audiences and
videos on homepage and custom color
manage viewing experience.
scheme (Video panel designer).

PRODUCT EXTENTIONS
USER PARTICIPATION
Maintaining a video queue and adding
videos for future viewing. Site was designed to respond to
Participating in Hulu's Discussion boards popularity and to allow users to express
and rating and reviewing videos, and by their views on the content. Self-Service
sharing interest with others Content Distribution made it easier for
users to share their content too.

FEEDBACK MECHANISM
INNOVATIONS - "HULU LABS"
Community Hour - 2 Employees
(highest-level executives to interns) "Time-based browsing - group videos
spent two hours reading and by air date, and recommendations -
responding to feedback and user- Viewing history defined content. "Hulu
inquiries. Wall of Shame for Community Desktop" - Hulu for Apple/Windows
Hour skippers. (Lean-back viewing experience for PCs)
VALUE CREATION
FOR
ADVERTISERS
"Our Goal is to complement
television and take advantage of
the unique attributes of online
media that can make for a more
targeted, interactive and
effective advertising experience"

STANDARD FORMAT PREMIUM FORMAT EXCLUSIVE FORMAT

15-30 Second video spots that ran One option was a Short video clip User controlled advertising
during advertising breaks. with "Brought to you by..." experience. "Ad Selector" gave users
Advertisers typically also received messaging, presented in-stream 2-3 choices (15 secs) of advertising
companion banners that before the content began. Could by one or more advertisers.
accompanied the spots and also opt in to various "canvases" "Branded Entertainment Selector" -
linked directly to the advertiser's that provided a branded skin in the choice between a long-form or a
site. area around the player. series of commercials
 hulu Case
HULU CREATING
DECENTRALIZATION CHALLENGES TO THE STRATEGY
VALUE FOR Clearer legal rights regarding who FX & Turner Broadcasting System pulled
CONTENT OWNERS controls the rights to the content (Music a few shows from Hulu. Higher focus on

SALES & DISTRIBUTION MANAGEMENT

rights too). Focused only on finding new per-subscriber fee of Cable Operators.
viewers. Hulu did not impose on having Cable operators banning online

"HULU IS ABOUT Exclusive Contracts. Content owners were streaming. Had to pull out its videos from
free to stream on any preferred platforms CBS Corp.'s TV.com and from Boxee.
THE CONTENT
MARKETING EFFICIENCY INTEGRATION OF IDEAS
OWNERS TAKING
Deals with 30+ affiliated websites Hulu was a blend of both, a destination
MATTERS INTO enabling content owners to connect with site as well as a Syndicate Content. The

THEIR OWN users across destinations like AOL, Distribution networks helped web users
Facebook, MySpace, MSN, etc. Hulu's discover its content and content owners
HANDS". distribution partners could integrate to monetize the same. (Upto 50% of
Hulu's content into their online offerings. Hulu's traffic came from outside
(Incentive: 10% of Advertising Revenues) Hulu.com)
 CONTENT CREATORS & ADVERTISERS' BENEFITS

Hulu allowed advertisers to target specific

genres, demographic groups, geographies,
day-parts, or behavior to "increase relevancy to
users and increase efficiency for advertisers"

USER & ADVERTISERS BENEFITS USERS & CONTENT CREATORS' BENEFITS

Apart from offering various Advertisement types, Hulu carried far less advertising than traditional
Users were given an option to "Thumbs Up" or television. (25% load of advertisements of an
"Thumbs Down" advertisements while they were average of 16 minutes). Maintained a balance
playing which provided the advertisers to also between advertising viewed and premium
get real time feedback for their ads. content consumed.
DIFFERENT BROADCASTERS' STRATEGY

Pay Per View Broadcasters Hulu Youtube

YouTube acts as a broadcaster

Broadcasters such as ABC, Fox and Hulu provides a complete free user where it provides content for free,
CW made their episodes paid experience where it provides and any user can upload their
download (For Example CW charges premium content for free while content too for free. YouTube too
1.99$ per download) generating revenues through generates its revenue from
advertisement advertisements
WHAT ARE THE UNDERLYING ECONOMIES OF HULU VERSUS THAT OF BROADCAST AND CABLE
TELEVISION? SPECIALLY, HOW DO THE REVENUES PER HOUR-LONG PROGRAM COMPARE ACROSS
TELEVISION AND HULU?

HULU CABLE BROADCASTER

• Allows user to pay for what • No such service • No such service

• he/she wants to view • No control over content • License fees obtained from
• Tailor made advertising or advertisement the
• options for marketers i.e. • cable networks major source
Standard • of income 1
• Premium • Ads placed through affiliates
• Exclusive • income 2
• Targeted customer MAIN SOURCE OF REVENUE IS • Ads placed on own channels
segments allows for ADS ACROSS ALL THE • Same ad for all the
marketers to tailor their PLATFORMS customers
content and gives Hulu • Reduction of revenue due to
more revenue REVENUE OF HULU WILL ONLY • availability of digital media
• About 25% of the • 16 min/hour of ads
INCREASE GOING FORWARD AS
advertisement by cable or • Longer ad slots but lesser
COMPARED TO TRADITIONAL
broadcast i.e. 4min/hour • revenue/sec
BROADCAST/CABLE
 CHALLENGES FACED BY PURE ADVERTISING-SUPPORTED MODEL

SECURING BROADCAST AND PER-SUBSCRIBER FEE BY CABLE RESTRICTION FROM CABLE LARGE TIME GAP TO AIR THE
CABLE CONTENT NETWORKS OPERATORS SHOW
Securing broadcast and Cable networks also Cable operators were Many popular shows were
cable content remained a considered the per- trying to convince the cable not made available online
big challenge for HULU subscriber fee that they networks to restrict the until eight days after they
since the content owners received from the cable number of episodes to be aired on television.
felt that the online operators before deciding made available online or
offerings of the shows will whether the show should directly remove the shows
undercut their TV ratings go online. from HULU.
and the DVD sales.

MOTIVATORS FOR If more or all episodes and seasons

Television content
Everywhere

TNT, TBS, CBS are of a show were available. (57%)

providers see this as a PEOPLE TO WATCH
all readily joining MORE
better opportunity to
TV

the trials for the TELEVISION SHOWS

increase their reach and If there were fewer ads. (47%)
“TV Everywhere ONLINE
revenues
SHOULD KILAR MOVE HULU AWAY FROM A PURE ADVERTISING-
SUPPORTED MODEL? IF SO, WHAT IS THE PREFERRED NEW MODEL?
To get access to premium content from the cable networks and broadcasters and to reduce the
load of advertisements in its videos, hulu must move away from the purely
Advertisement-supported model

ADVERTISEMENTS SUBSCRIPTION & PAY PER VIEW

A small monthly or annual subscription fee or
From advertisements since they
the pay per view of top-rated shows from the
have varied advertising formats
users who will get exclusive updated content
and targeting capabilities
other than freemium

Also, the online advertising

This will create better value for the content
spending in U.S. has risen
owners and this extra revenue can be used to
significantly from 1997 to 2008
get access to all the episodes of popular shows
and reduce the load of advertisements
hulu: An Evil Plot to Destroy the World

THANK YOU
MBA21061 Stuti Ajmera MBA21077 Akash Kumar Rai
MBA21091 Dhruv Yadav MBA21069 Shivam Zanjat Rao
MBA21107 Mayank Damani MBA21085 Aritra Saha
MBA21116 Ravi Shankar B MBA21087 Buddha Kinkar Bhaumik

GROUP 4 SALES & DISTRIBUTION MANAGEMENT