Why a Successful Hulu was a Problem
Why a Successful Hulu was a Problem
Why a Successful Hulu was a Problem

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    It has been reported that NBCUniversal, News Corporation, and Walt Disney Company
    block access to Hulu unless you pay for both a broadband subscription and a
    paid TV subscription.  Such a move will
    prevent an estimated
    3.58 million

    people from becoming Hulu customers and likely stifle Hulu’s future
    success.  Who else but the executives who
    brought you the Stop Online Piracy Act (SOPA) would actively strangle their own
    Internet success story?  With an annual
    doubling of revenue and average monthly growth of 100,000 paid subscribers, it
    must be that Hulu was too successful (and disruptive) for its stakeholders to
    handle.  So rather than embrace the Internet, they have opted to reverse
    course and try to preserve the increasingly rejected business model of cable
    and satellite TV.


    Hulu Fail

    it is not a surprise that after ten years of
    subscription rate increases exceeding inflation
    , millions of
    consumers have opted to save money and switch to
    broadband only for video consumption. 
    One of the reasons prices have continued to climb over the years is due
    to fees content companies (through broadcasters) have been extracting from
    cable and satellite companies for program carriage.  This process, known as retransmission
    is also the reason why the bundles that are sold to you contain hundreds of
    channels you do not want to watch.  It
    used to be that broadcast television made its money solely through advertising
    and free use of spectrum (a multi-billion dollar asset) provided by the

    now fees pushed by content companies through broadcasters onto cable and
    satellite providers are seen as an easy way to
    increase profits

    and subsequently consumer’s bills.  While
    major content companies still make money with either Hulu or your cable and
    satellite subscription, the Internet requires content to aggressively meet the consumer at the
    price point they demand while the old business model forces one bulk high price.
     The problem with this approach today is
    that consumers have the choice to cut their subscription and pay and view
    content through broadband.  Look no
    further than Comcast (who is also NBCU) and you will see that they have been
    losing cable subscriptions for the last
    five years running
    but continue to see growth in broadband

    the issue of piracy as a separate policy matter, what do Hulu’s masters think
    will happen when an estimated 5 percent to as high as 9 percent of TV
    households suddenly lose access to Hulu (much of its content already free to
    see via broadcast)?  Does anyone truly
    expect people to repurchase their expensive cable and satellite subscriptions?  When
    consumers have chosen to reject the old model with their dollars, one cannot
    just force them back and require that they perpetually pay more of their
    money.  Unfortunately, what will happen
    is more people will turn to piracy not out of malice towards to the industry,
    but because that is the only option left to them in these tight budget times.

    Now they have every right to change their
    business model but this type of top down control belief that somehow you can
    control people’s behavior on the Internet and force them to pay ever increasing
    prices is the mindset that birthed SOPA. 
    irony in this situation is that it could have been possible that Hulu eventually
    made more money than the old business model while simultaneously reducing
    piracy (the alleged goal of SOPA). 

    its launch in 2007, Hulu has shown that it is possible to profit from preventing
    millions of consumers from engaging in piracy by making content legally
    accessible on the Internet.  Just in the
    month of March 2012 alone, 31 million people decided to watch content they
    could have pirated and choose to view advertising or directly pay for access
    through a Hulu Plus subscription.  With
    growth approaching 2 million subscribers and an online
    advertising platform that was serving 1.4 billion ads
    per month

    (more than YouTube), Hulu’s future was bright.  Despite all of this good news of break neck
    growth and substantial room for additional growth, the desire to preserve the
    old business model continues to override the necessity to embrace the