This morning, Boxee users woke up to some very bad news. As was revealed on Boxee’s blog yesterday, as of tomorrow, the “social media center” software will no longer be able to stream shows from Hulu. Don’t blame Hulu, however: as is explained on the Hulu blog, this is being done at the behest of unnamed copyright holders–ostensibly FOX and NBC, Hulu’s owners and largest content providers–and the folks at Hulu don’t sound too happy about it. “The maddening part of writing this blog entry is that we realize that there is no immediate win here for users,” Hulu CEO Jason Kilar writes. “Please know that we take very seriously our role of representing users such that we are able to provide more and more content in more and more ways over time.” When studios pull user-uploaded content from sites like YouTube–content for which they do not receive advertising revenue–it’s quite clear what their motives are. But when content on Hulu–content that’s uploaded by the studios themselves and which contains embedded advertising–is blocked from reaching users, the studio’s intentions become more difficult to discern. Let’s dig a bit deeper.
Boxee, in case you’re not familiar, is a free, cross-platform media center application that allows users to access content from a variety of sources on a number of different hardware platforms. Unlike similar media center applications, Boxee also integrates social networking platforms like Twitter, Tumblr and Facebook, allowing users to recommend content to their friends. The software’s main selling point, however, is its ability to bring streaming media from a number of sites–including the BBC, CBS, CNN, Comedy Central, Last.fm, MTV, Netflix, NPR and YouTube–all under one roof. Using a Mac, Linux or Windows PC or Apple TV set-top-box, users can access a world of content, using Boxee as a single gateway.
One possible point of contention, at least from a studio perspective, is that unlike many other media center applications, Boxee also throws a Bit Torrent client into the mix. Boxee’s built-in BitTorrent client, however, directs users to legal BitTorrent trackers. While unofficial plug-ins are available that allow users to download files from illicit trackers using Boxee, Boxee in no way endorses or enables copyright infringement. In that sense, Boxee enables piracy just as much as Microsoft or Apple do–by providing a platform for accessing legal content that can also be used for illegal means–if the user chooses to run third-party software for that purpose.
Unlike Windows or OS X, however, in certain instances where ill begotten content is involved, Boxee will attempt to redirect users toward licensed content. Let’s say that I illegally download and watch an episode of “The Simpsons” using a Torrent tracker. When you look at my viewing information, it will show you that I’ve watched that episode of “The Simpsons,” though it won’t direct you to the Torrent that I used. Instead, it will provide you with links to officially licensed versions of the content, where available. Boxee can be seen as a unique platform in this sense–one that attempts to help content holders answer that question that they seem to be continually asking: How do we get users to view content on our terms when it’s already available for free online?
When is a Browser More Than Just a Browser?
Hulu, like YouTube, Vimeo and other video streaming sites, is little more than a browser-based video portal. However, unlike YouTube, Hulu–which is a joint venture between FOX and NBC–was designed to serve as a destination for officially licensed content. In order to monetize this content, Hulu features both embedded advertisements and links to purchase the content being watched.
When you view a Hulu video using Boxee, you see the embedded ads and retail links just as you would when viewing Hulu using any web browser. Therefore, the studio that produced that content receives the same amount of revenue whether you choose to watch a video with Boxee or with Firefox. For this reason, from Hulu’s perspective and arguably, from the perspective of the studios, Boxee should look like any other browser out there. While it may not fit the standard definition of “web browser,” it essentially acts as a content browser–though, functionally speaking, there’s little difference between the two. What if Hulu suddenly decided to block access to Firefox users? Or Internet Explorer users? Or Safari users? Would that seem fair?
Swimming Against the Tide
If Boxee simply acts like a web browser, if studios make just as much money streaming content to Boxee as they do streaming to browsers and if Boxee encourages users to consume legally obtained content, why on earth would the studios want to sever the link between Boxee and Hulu? The answer, ostensibly, has a lot to do with a more antiquated source of television programming: cable. Recently, we’ve been seeing more and more reports of tech-savvy users ditching their cable boxes in favor of online content. With a fast web connection and a PC, users can access a wealth of free, legal content, some of it even in HD. And if a user has a device like an Apple TV and software like Boxee, she can even watch that content from the comfort of her living room couch–much like she would with a costly cable subscription.
Currently, television studios have two revenue streams when they sell to cable providers. They charge the cable providers a per subscriber fee and also charge advertisers for access to those subscribers. As a result, networks make quite a bit of money distributing their content using the cable model.
On the web side, however, studios are still trying to cobble together a business model that works. Though most studios are secretive about what percentage of their revenue is derived from online advertising, it’s pretty safe to assume that no studio is currently making enough money online to displace lost revenues elsewhere. As NBC CEO Jeff Zucker often says, “We can’t trade analog dollars for digital pennies”.
Still, there’s little to suggest that revenues from online content and revenues from cable content are mutually exclusive. Yes, online viewership is up and cable subscribers are down. And yes, this trend is likely to continue, given the current financial climate. But that doesn’t mean that, at least for the time being, cable and online video can’t coexist. Data from last year’s Olympics in Beijing suggests that the vast majority of viewers still turn to traditional sources for their programming (though some have suggested that NBC’s poor implementation of web video during the Olympics was to blame for the low online viewership). According to the Wall Street Journal, around 90 percent of viewers watched last year’s Olympics on television. Around 10 percent of viewers watched the Olympics both on television and online. Only 0.2 percent of users elected to watch exclusively online.
While the number of users that watch television content online is sure to grow in the coming years, it’s almost certain that by the time we reach the online/cable tipping point, the studios will have had enough time to find an online business model that works. Were the studios forward thinking, they would realize this fact and embrace online platforms as the inevitable future of content delivery. Instead, they’ve balked at the sight of a media center that they don’t control that makes it easier for users to access their content online and they’ve pulled the plug for fear that software like Boxee will encourage users to cut their cable connections.
Of course, the irony here is that users will continue to ditch their cable boxes whether or not the studios allow their content to be used by innovators like Boxee. Lest we forget, there’s plenty of illegal content to be had online and if the studios make it difficult for users to legitimately access content in ways that are convenient, illicit options will become more attractive. Unlike most media center applications, Boxee attempts to steer users toward licensed content but in the absence of such content, there’s little mystery as to where those users will turn. Thanks to this shortsighted decision, NBC and FOX might be forced to learn a fundamental truth about the web the hard way. If you build it, they will come. But if you tear it down, they will leave. And chances are, they’ll never come back.
Content owners of all stripes have long complained about the scourges of online piracy and nearly all of them have professed that if only they could figure out how to get users to access that content legally, they would happily embrace the myriad possibilities that online distribution offers. Are studios like FOX and NBC really interested in providing their customers with the content that they want in a way that makes sense? Or are they simply determined to prop up antiquated business models at any cost? If it’s the former, it’s high time for them to put their money where their mouth is.