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Stewart, Colbert, and Hulu’s thoughts about the future of TV

February 2nd, 2011 by Jason Kilar CEO

We are extremely happy to announce a broad content agreement between Viacom and Hulu that brings The Daily Show and The Colbert Report back to Hulu and now also to Hulu Plus, beginning this morning. Each of the shows will be available the morning after they originally air.

As part of the agreement, a selection of great current programming from MTV, Comedy Central, VH1, TV Land, BET and other Viacom channel brands will also be added to Hulu Plus. Each episode of leading shows like Jersey Shore, Teen Mom 2, and Tosh.0 will be available starting 21 days after their on-air premiere, and all episodes will remain on the service through the end of their respective season. Welcome to Hulu Plus, Snooki.

In the coming weeks on Hulu Plus, we also will be adding more than 2,000 episodes of shows from Viacom’s library including Chappelle’s Show,The Hills, Reno 911, and many more.

While the new content above is news on its own, I thought it would be appropriate to use this opportunity to also share the Hulu team’s point of view on the future of TV. For those interested, read on. For those not interested, may we suggest the latest episode of The Daily Show?

Jason Kilar
CEO Hulu

The Hulu team is often asked about our thoughts on the future of TV. The following represents our point of view, which has been materially influenced by our daily interactions with users, advertisers, and content owners. We are fortunate to have such meaningful interactions with these three customer sets, and we are relentlessly inventing better ways to serve them.

The future of TV.

Distributors will certainly play a role in the future of TV, but we believe that three potent forces will be far more powerful in shaping that future: consumers, advertisers and content owners.

Consumers have spoken emphatically as to what they want and what they do not want in their future television experience. What we’ve heard:

* Traditional TV has too many ads. Users have demonstrated that they will go to great lengths to avoid the advertising load that traditional TV places upon them. Setting aside sports and other live event programming, consumers are increasingly moving to on-demand viewing, in part because of the lighter ad load (achieved via ad-skipping DVRs, traditional video on demand systems, and/or online viewing).
* Consumers want TV to be more convenient for them. People want programs to start at a time that is convenient for their schedules, not at a time dictated to them. Consumption of original TV episodes will eventually mirror theatrical movie attendance: big opening Friday nights, but more consumption will be in the days and weeks afterward. Consumers also want the freedom to be able to watch TV on whatever screen is most convenient for them, be it a smartphone, a tablet, a PC, or, yes, a TV.
* Consumers are demonstrating that they are the greatest marketing force a good television show or movie could ever have, given the powerful social media tools at consumers’ disposal. Consumers now also have the power to immediately tank a bad series, given how fast and broad consumer sentiment is disseminated. This is nothing short of a game-changer for content creators, owners, and distributors.

The above trends are a reality and we believe the wise move is to find ways to exploit these new trends and leverage them to build great businesses. History has shown that incumbents tend to fight trends that challenge established ways and, in the process, lose focus on what matters most: customers. Hulu is not burdened by that legacy.

Advertisers have weighed in heavily on the future of TV, with both their thoughts and their considerable wallets. Advertisers are increasingly expecting to present their advertising messages to just their desired audience…and not to anyone else. For over 60 years, video advertising could only be bought via a TV show’s projected audience, which served as a blunt proxy for a certain target audience. The result has been many wasted impressions and an often irrelevant experience for consumers. In the near future, advertisers will demand the ability to target their messages to people rather than targeting their messages to TV shows as proxies for people.

Content owners, the third factor in the future of TV, have been very clear: they as a group need to make a fair return on their significant investment in creating content. Content owners will license their best content in the best windows to those distributors that pay the most on a per-user per-month basis. Content owners will bundle their content to the degree customers will respond, simply because it is in the content owners’ economic interest to do so. If enough customers refuse to purchase their bundles, then the bundles will either be reduced in price/scope (possible) or dismantled (far less likely). Customers will ultimately make the decisions here.

With the above dynamics in mind, we believe that there is going to be tremendous near-term innovation in the pay TV distribution business. The internet has made it possible for new entrants to innovate quickly and materially. Consumers will have more choice and convenience going forward. This competition will drive prices and margins down in pay TV distribution. A greater percentage of the economic pie will flow back to content owners and creators. As mentioned before, advertisers will be able to target their messages to people, not to TV shows as proxies for people. Going forward, rapid innovation, low margins, and customer obsession will define the winners in pay TV distribution.

The above has influenced the path the Hulu team has taken to date. In 2007, we began the process of building what is now the leading online video advertising service. Based on metrics from Nielsen/IAG, Hulu’s video advertising service is roughly 2x as effective as traditional TV video advertising services. Our point of view since 2007 has been that if we become the most effective video advertising service, then we could earn higher advertising revenues (per hour of content consumed) than anyone else’s ad business. We also have been highly focused on the reality that advertising monetization during a DVR session is headed steadily downhill, which is a looming issue for content owners. And the answer is not adding a full broadcast ad load to the video-on-demand experience (that will just drive DVR viewing – and ad-skipping – further north). Our conviction remains that if we respect the customer and innovate effectively, we can pay content owners more from the ad side of the business than anyone else’s ad service can do (be that live/linear consumption or DVR viewing). The below chart compares how much revenue Hulu currently generates from advertising per half-hour tv episode versus the advertising revenue that traditional distribution generates.

In the near to mid term, we anticipate being able to generate higher advertising returns than any traditional channel can from their advertising service, for any type of content. We’ve invented patentable technology that has enabled us to deliver much more relevant video advertising and to do so in a manner that generates much higher recall and purchase intent than other video advertising services. The market is responding: we expect to approach half a billion in total revenues (advertising and subscription combined) in 2011, up from $263 million in 2010, which was up from $108 million in 2009.

But advertising is only part of the equation. The other part is subscription. We officially launched Hulu Plus on November 17, 2010, 11 weeks ago. Hulu Plus is a dual revenue stream subscription service; one revenue stream from the subscription fee, the other from a modest amount of advertising (half the advertising that you’ll see on traditional TV). Hulu Plus includes full current season access to many of TV’s top programs, on an array of internet connected devices, available anytime in an unlimited fashion, for $7.99/month. Our subscriber count will pass 1 million this year, to our knowledge the fastest start of any online video subscription service. In the fall, we expect Hulu Plus as a business will have a revenue run rate north of $200 million. A key element of Hulu Plus is that we are able to compensate content owners more per-user per-month than anyone else for the same body of content. We are able to do this because of the subscription fee, our unusually effective and market-leading advertising service, and our tolerance for thin margins.

The opportunity for content owners.

We believe content owners are in a strong position to make higher returns from TV content distribution in the future than they have historically. If studios and networks license their content to distributors with per-user per-month economics as the model (as opposed to a fixed fee model), then they will be able to extract a higher portion of the total economics their content will generate. We state this given our belief that the majority of the US population (and a material percent of the globe) will be subscribers to some flavor of digital premium content service going forward. We also believe that any number of digital distribution companies have the ability to quickly get to scale; getting to scale is not the hard part about this business. Over the past 4 years, studios and networks have not always insisted on per-user per-month economics in their digital licensing agreements, which has resulted in a regretted under-pricing of their content to digital distributors. That said, we believe that all studios and networks will recognize that it is in their economic interest to insist on per-user per-month pricing in all their distribution relationships (library content and current content). Given the above future, we see strong upside for content owners that are laser-focused on the per-user per-month economics. A greater percentage of the pie should flow to content owners and creators in the future.

Free, ad-supported services.

Given all this talk of dual revenue streams, what becomes of free, ad-supported services like the original Hulu service? We think content owners will pursue one of two paths for each individual piece of content, each for valid reasons:

1. A portion of content will leverage free, ad-supported services aggressively, given a digital service like Hulu provides unusually high ad monetization when compared to DVR sessions and even the bulk of live linear ad monetization. For a substantial body of content, we suspect that Hulu’s ad supported free service will provide the best financial return available to those content owners/creators. We expect significant experimentation will continue as it relates to windowing, as we have seen these past 3 years.

2. Another portion of content will only be available to users that either subscribe directly to a digital service or, alternatively, authenticate that they already have a traditional pay TV subscription. Once a user is recognized as a pay TV service subscriber, the user will be able to watch a specified body of content.

Hulu’s responsibility is to deliver the world’s leading dual revenue stream service and to deliver the world’s leading free, ad-supported service. We expect the free Hulu service to be a core part of our business for years to come, and one that will continue to earn enthusiasm from our users. The stronger the returns we can drive in our free, ad-supported service, the more content will show up in that service. The same goes for our Hulu Plus dual revenue stream service. Clearly, content owners will decide which distribution channels are best for them. As we deliver leading services, Hulu will pay content owners and creators more per-user per-month than anyone else. At the same time, we will be able to price our services for consumers lower than anyone else offering the same body of content, given our market-leading ad service and our tolerance for low margins.

The relentless pursuit of better ways.

It is clear to us that — because of the internet and the increased competition/innovation it brings — the future of TV is going to be very good to users, advertisers and content owners/creators. Users will have convenient access to much more content. We also expect to see lower consumer prices, which will be a function of a marked increase in distribution competition. Advertisers will be able to efficiently and effectively target their messages to just their desired audience, thanks to the internet medium. And content owners will have the opportunity to make higher financial returns, which will be a function of disciplined per-user per-month licensing strategies, along with the benefits that come with intensified distribution competition.

Our journey at Hulu involves significant risk. That is the nature of innovation, particularly the business of re-inventing television. A number of you that are reading this might be thinking that we’d have to be crazy to think that our small team can actually re-invent television and compete effectively against a landscape of distribution giants like cable companies, satellite companies, and huge online companies. We are crazy. All entrepreneurs need to be. If it was easy, everyone would be doing it and there would be no naysayers. We are nothing if not a team that believes in the value of convictions, thoughtful stubbornness, and the relentless pursuit of better ways.

Jason Kilar
Hulu CEO

Last comment: about 9 hours ago 113 Comments
  • Excellent post however , I was wondering if you could write a
    litte more on this topic? I’d be very thankful if you could elaborate a little bit further. Many thanks!

  • Alex Feldman says:

    What are the units for the charts above, the monetization per half our episode?

  • Aurore Randa says:

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  • tulisa says:

    i think the future of tv will be smellavision

  • bruna says:

    Quer assistir canais de TV por assinatura http://www.tvhd.com.br

  • Hi Cole,

    Thanks for getting in touch with us. At the moment, we don’t have any international streaming rights for our content, so we’re not able to stream outside of the US – but we’re looking to get there as quickly as possible.

    Before we can, we need to obtain streaming rights for each show and movie in each specific region. We may also need to establish relationships with local advertisers to subsidize our streaming costs, like we do in the US. We might even need new technology partnerships to ensure that content streaming is up to our standards.

    It’ll take some time, and I don’t have a definitive timeline just yet, so thank you for your patience in the meantime. If there’s anything else I can address for you, just let me know.

    Thanks,
    Udaya
    Hulu Support

  • Cole Rivers says:

    Here we are one year later and sadly we in Canada still cannot get Hulu. :( I have to use a VPN just to get access to it in the US.

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  • Tyler says:

    There’s a lot of talk about how much ads bring in monetarily, and then justifcations for the use of ads by saying that there are only half the ads in Hulu videos as opposed to live tv. I don’t know if this blog is supposed to be geared towards investors in Hulu or whether if it is supposed to be to their audience. All I know is, there is nothing in this blog that might address how unhappy users are with the usage of ads in their videos. The ads are always the same, annoying, and are increasing. These ads aren’t tailored to the user in anyway. It is a pity, because Hulu offers terrific shows with high resolution. However, with no way to fast forward though ads like you would with cable, it leaves one yearning to returning to the cable. So much for cutting the cord on cable. Perhaps the blogger can do a post on why Hulu hasn’t offered an ad free version of their service?

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  • Andrew says:

    Please do not start using ads that require user action to return to video. One of the most important benefits of watching TV or movies is to sit back and relax. There was a Lowe’s ad in Hulu recently that required I click “return to video” to keep on watching… If I don’t want to choose between or take action on advertisements, then don’t make me.

    I’m not asking much, I just want to completely relax for 30 minutes.

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  • Conner says:

    Have you thought about personalization of Hulu’s site? One great feature of Netflix is the ability to recommend relevant shows and movies based on what I’ve watched and what I say I enjoy! I find myself getting into great media that way!

    Thanks,

    Conner

  • [...] For Hulu CEO Jason Kilar’s take on the new partnership, check out his post on here. [...]

  • Hi Lance,

    Thanks for your post. Can you explain what you mean? Our deal with Viacom, The Daily Show, and The Colbert Report are all still very much in place. Are you seeing anything in particular missing and if so on what device?

    You can also contact us with questions at http://bit.ly/HuluHelp .

    Thanks,
    James
    Hulu Support

  • Lance Cummings says:

    This sure didn’t last long. So much for Hulu Plus. Soon to be cancelled.

  • Eric says:

    Hulu needs one deal with ever provider. For $8, I don’t want to wait three weeks to watch my shows.

    This article claims that shows like Tosh.0 will be on Hulu Plus until the end of the season – so where are the episodes from earlier in this season? They’re not online anymore.

    USA Network, despite being owned by the same corporation as Hulu, doesn’t have previous episodes of most of its shows. There’s far too much inconsistency in Hulu Plus content to be worth paying for.

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  • [...] the online video site, and also provide it with the majority of its content. Earlier this year, Kilar defended the company’s business model in an open letter that reportedly enraged his corporate stakeholders and media partners. That led [...]

  • Jack B says:

    My primary interest in Hulu is your anime. I would at least consider paying for hulu plus if you had complete anime series, such as the missing seasons of Bleach or anime series such as Neo Angelique where you supply only two episodes out of much longer seasons. I am not happy about the commercials, but would still be willing to pay if you supplied the longer runs and missing seasons of such series. But not before.

  • Jelan.kendrick says:

    The blog talks about the future of TV and the company Hulu’s plans for their future business. They believe that consumers are no longer watching regular TV, and are now getting their favorite shows at different times in different ways. Viewers are watching more television on-demand or online, and Hulu thinks it has a lot to do with ads. People don’t want to sit around and watch eleven minutes worth of ads during a thirty minute TV show, they want to be able to fast forward through the ads or skip them all together. Hulu talks about incorporating this information to better their business. They use fewer advertisements but since their costumer base is so large and their advertising is twice as affective as TV, advertisements are willing to pay. They also offer a subscription service where users can pay $7.99 a month for unlimited movies and shows, anytime they want anywhere. Through the use of subscription and advertising Hulu made $263 million in 2010 alone. I think Hulu has a good market plan, but their website/service is only available to United States residents. In only making their subscriptions available in the US I think they are losing a lot of money in the international market. There are many people in other countries, military families, students studying abroad, etc. that would like access to Hulu’s shows and movies and would probably be willing to pay for it. Another fault of Hulu’s is their flaws with their subscription program. For $7.99 a month members should not have to deal with ads, but with Hulu Plus they are still forced to endure ads with their shows. The company Netflix charges the same amount a month and they have a larger selection with no ads whatsoever. Those are the only flaws I think Hulu should work out, other than that I think their company is pretty good and defiantly have used their website before to watch shows. If they remove the ads for Hulu Plus and expand their services overseas I think they could be even more profitable in the years to come.

  • [...] Hopefully not. More ads doesn’t seem to fit into CEO Jason Kilar’s “vision”. In a Hulu blog post back in the beginning of February he wrote, “Traditional TV has too many ads. Users have [...]

  • readreed says:

    Interesting how nobody is kvetching over having to wait 21 days before CC content is made available. That is even worse than the rules for episodes of House.

    Is this a sign of what’s to come in placating the throngs of us who feel entitled to free content with little or no ads?

  • Michael P says:

    Why are latest Daily Show and Colbert Report web only today and won’t play on my iPad? Was it because my one week trial period ended and these two shows were the main reason I subscribed to Hulu plus in the first place?

  • overlooked says:

    This analysis is genius. EXCEPT. You have completely overlooked the enormous market outside of the United States. It may come as a surprise to you, but there are actually billions of other people on the planet.

    Personally, I am one of them. That’s right, I live outside of the USA. What’s more, I would like to watch some tv shows. I’d even be willing to pay for the right to watch your entertainment products. And I know I’m not alone.

    In fact, I’d hazard a guess that military families, corporate expats, the diplomatic corps, and college students studying abroad make up a considerable market. So how about you consider us?

    There will eventually be a tipping point when you have angered people out here so much that we won’t use you when you do open up services to us. What you don’t seem to include in your analysis is human interaction…people living abroad really hate hulu for blocking us. Thought you should know.

  • Rational Voice says:

    I will pay for Hulu Plus when (in order of priority):

    A) there are no commercials, and
    B) the price is lower.

    Until then, I will continue to suffer with the free version, torrents, and broadcast TV recordings.

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  • Dan says:

    Well, here is why I just quit Hulu plus.
    No Windows Media Center support! Seriously! The Hulu “viewer” is utter garbage. Its buggy, doesn’t work properly with a remote, doesn’t integrate with Windows Media center at all.
    Netflix on the other hand integrates very well with Media Center, which is why they are now my streaming provider of choice.
    I consume my “streaming media” like I consume my TV. On the couch, or on my Ipad. Sadly, Hulu can only do the latter.
    Lets not mention that Netflix is the same price, appears to have more content, and no commercials.
    For content, lets not mention how frickin difficulut it is to navigate the Hulu desktop interface. Or the intermix of “clips” with real episodes (clue: nobody gives a crap about “clips”).

  • [...] helps drive more monetization per episode than most other platforms, including DVR and cable. In a long blog post defending the company’s business model, CEO Jason Kilar said Hulu’s averaged $0.143 in ad revenue per episode in 2010, better than [...]

  • Domenico says:

    Thanks Jason for your insight. I thought of this 20 heats ago but Let’s not get into that. I can’t believe how ignorant most of the commenters here are. There have been only talks about the services being there for the US of A while there is an even bigger world to explore. The world want the content but it’s get to be ignored big time.

    Let me make this short and simple, I’m from the Netherlands and I don’t want to pay umpteen middle men and wait for ages before I can see something produced in your lovely country. I want to pay straight up for my content, I have the money but I’m not allowed. Say what? I’m not allowed to pay the content providers directly because I don’t live in the right part of town. Well screw that! This is really old and stupid thinking I can’t even start to describe. You can’t think smaller then that. Anyways, ny the time I can get my ice-cream it is already melted so no thanks.

    So, in short. I have the money, I want to pay but I’m not allowed, have to stand in the back and not speak till I’m spoken to. F*ck that! I’m done with stupidity and untill you will acknowledge the people outside of the wonderful United States and also acknowledge that the Internet has no borders and threat everybody as equals I will download everything I want to see (but not allowed to) whenever I want to see it, in HD, ad free, for free…

  • Alex says:

    It’s funny – all these comments are from people who watch and use Hulu (obviously). But the mistake being made here, is the assumption that this is the majority. The problem that this ‘digital revolution’ does not take into consideration is that broadband capablities, especially in the US, are in their infancy. The majority of citizens cannot afford to pay a premium after premium after premium. And when given too many choices – will not make one at all. The first and foremost premium being that high speed internet access is still EXPENSIVE. Yes, cable packages are expensive and a rip-off – but at least that’s the total cost. No one here is mentioning the potential costs to the consumer for paying for a high speed broadband subscription PLUS pay model fees for every show a mere channel surfer may want to watch! How many of you have tried to watch online tv on a mediocre connection? And how long did you last before you shut it off in frustration? Well, that’s the majority of the country.
    YOu also are not recognizing that in all your experimentation the past few years, you have been raising a generation of entitled people. People who want their tv and movies when they want it and…for free. Yup, hundreds of millions of people around the world are now accustomed to not only watching their tv shows and movies for free, but also ad-free.
    The fact that people on here want to teach traditional cable a lesson by banishing them from history are ignorant beyond belief. Do people really think that all the content available on television shows can survive on payments from online distribution? Really? Who’s going to market an offbeat PBS-type show to the passive viewer with a remote in one hand and a beer in the other? You think Hulu is going to sink millions of dollars in P&A to a show that cost $25k to produce? People assume that everyone knows exactly what they want to watch all the time. Online viewing is not a passive experience like television is. Hulu’s model is incomplete because it doesn’t take into consideration the majority of passive viewers who do are not going to whip out a credit card for every network plus a high-speed internet connection.

  • Jay O'Conner says:

    C. Scyphers I am hoping that they hear you at HULU.com and take WCNTV’s proposal seriously, HULU.com could become the Web’s MSO if they would open the gates for Content Owners to use Product Placement Brandcasting technologies which would allow a viewer to purchase anything seen via streaming video. WCN your Brandcasting Partner is working to help change the model for IPTV as a extension of the Broadcast options while it lasts. Viewers are tired of subsidizing reruns and if a subscription option is going to work there must be a innovation which make it advantageous to make that additional investment. As one commented said he prefers to watch the Daliy Show on the Daliy Shows.com. For that user to be swayed you have to activate the show in ways that even the audio is mapped to additional information including merchandising opportunities. In all there must be Alliance and Collaborations formed to allow producers to get financed and Artists and Actors including all the supporting cast down to the Craft Service workers benefit from a new revenue stream that Advertisers will flock to when they understand the power of the data exchange knowing who clicked on their product and how many made a instant purchase decision.

    We look forward to comments, questions and total engagement of all stake holders in Entertainment and Media. Jason I am a email or skype away. I Got your Back…..

  • Adrian Meli says:

    Jason, thanks for the thoughts. Best of luck to you in redefining the space but it seems like it will be a big dogfight. I applaud your innovative streak and find the video space fascinating to watch play out. It is a bit complicated because a lot of the big content creators are tied to the distributors and it is also unclear whether higher internet prices will make it more effective to broadcast longer term. That said, it does seem clear people want what they want wherever and whenever they want it. Welcome to the internet… – Adrian Meli

  • [...] reading Hulu CEO Jason Kilar’s most excellent recent blog post taking aim at how television and cable companies (i.e. his bosses) is delivered and the follow-up [...]

  • Jim says:

    If Hulu wants a bigger reach it needs to be available on multiple devices and platforms. Hulu should be just as promiscuous as Netflix! I for one would love to see Hulu on Windows Media Center with native integration like Netflix or built into my Panasonic TV or my blueray player.

  • As a content owner, and one who has worked with Hulu for some time now, I applaud Jason Kilar and his vision for the future of TV. I will leave to those who are far wiser, and prescient about how the future for television will unfold, but putting the audience, and the content creator squarely at the center, is the only way forward to preserve the diversity and uniqueness of short and long-form programming content.

    For those who staunchly defend the overloading of (largely) irrelevant and intrusive advertising on existing television, as the continued model forward—stop looking in the rear view mirror—the road ahead beckons, and the standard Model T must move, or be pushed, over to the side.

  • The notion of “syndication” and “distribution windows” will take on greater meaning and urgency in the days to come. In particular, I look at the staid upfront season as prime for a facelift: there are too many sacred cows and too many video opportunities both domestically and internationally for that institution to continue on in its current form.

    As Wm Richmond noted elsewhere, perhaps it is time to return to Amazon.

    Some thoughts from Quora:

    http://www.quora.com/This-decade-technology-will-drive-a-reinvention-of-the-TV-broadcasting-industry-what-will-some-of-those-game-changing-shifts-likely-entail

  • Leah says:

    Let me tell you how my household watches TV and perhaps that will help you in steering Hulu to where most of your consumers are going. I don’t think we’re at all unusual in our media-watching habits. I just canceled my DirecTV account after being with them for approximately 12 years because we realized that we only watched one or two shows – shows we can watch on line. The television is only used for playing video games or watching movies. I subscribe to Netflix (3 discs at home w/streaming) and watch TV on Hulu. We watch quite a bit of TV; just not *on* a TV set. Too many commercials drove us away. Here’s what I want:

    1. To watch TV shows when I want to, where I want to with a small amount of commercials if necessary, like Hulu Free does. I’m happy to wait until the next day to watch a show on Hulu and I don’t mind the amount of commercials Hulu shows. Sometimes I even watch them. ;-) I’m not happy about 8 days later or even later than that. It has to be the next day.

    Note: If a network doesn’t allow their shows on Hulu (ABC, I’m looking at you – “The Big Bang Theory”, “V”, etc.) then I don’t watch those shows. I will not go back to watching them on the TV set nor will I subscribe to a cable/satellite service again. End of story.

    2. I would pay for Hulu Plus only if it offered shows I couldn’t get on Hulu Free (see Note above) and/or – and this would be really brilliant – if it offered current-run movies that will never play in the backwater city in which I live. Or if I could see shows I wanted to on the day after they aired and not have to wait 8 days or whatever. I would not mind watching commercials on Hulu Plus if they were no more intrusive than the ones on Hulu Free are now. So please note that I’m not averse to paying for content; the content creators have to get paid of course.

    I think that the future of TV – the future of entertainment media, really – is that consumers are going to want to watch exactly what they want (not needing to subscribe to a cable/satellite “package” of which 90% is nothing I want to see) at whatever time they want. Truly “media on demand”. Hopefully between Hulu and Netflix you’ll be able to provide that. The content providers are going to have to realize that many content consumers no longer use the old model of just watching television and following TV Guide.

  • Ty Braswell says:

    Such a brave commentary.

    It is déjà vu watching this unfold so similar to my experience with the music industry a decade ago.

    The digital immigrants control the content…..and refuse to learn the language of their new audience—the digital natives.

    Here’s more from an article I wrote for VentureBeat that also ran on NYTimes.com
    Why 2011 Will Be Do-or-Die for TV
    http://goo.gl/v456q

  • Caroline says:

    Crazy? Yes, simply because one of those cable companies now signs your checks. That said, when an assertion of this sort is made in direct competition to the hand that feeds it, we should all be obliged to pay more attention.

    First off, this is an incredibly insightful post. I do agree that Hulu is garnering a much stronger share of engagement than traditional outlets. Less ads and innovative ad models have led to better solutions for brands.

    Do I think Hulu has the mass scale yet to truly embody this model? No. That said, the points made here reference the future and it certainly could head in this direction. Some challenges: lack of content. Daily Show and Viacom’s portfolio is certainly a step in the right direction. However, there are so many programs missing that Hulu is only one finger on the left hand, not a one-stop assortment of content. I left my cable behind over a year and a half ago and have come to know the available content online like you probably know what’s on Bravo right now.

    I’d like to be able to watch a little Gossip Girl in the quality fashion that I have come to expect from Hulu rather than being kicked to the CW site. I’d like to find some HBO, perhaps behind a premium subscription wall. Watching TV online sans cable is a search and discovery mission rather than a lean back and enjoy experience. Until the content begins to aggregate in one place for consumers to enjoy, the search and discovery will continue. I’d also like to see more live viewing. Yes, viewers want the freedom to watch what they want when they want but sometimes that when is now.

    Netflix not only has a larger library but an ad-free subscription model. They also now have an additional button at the foot of the TV environment: the remote control. Freemium models work because the simple advantage is lack of ads. More content but with ads is simply not going to build the empire stated above and cheapens the subscription in a way.

    It will be interesting to see how all of this plays out but clearly, the future of TV looks far different than simply the remote control and a cable box.

  • Smackydoodle says:

    It’s great. In this comment section, you can tell who the people are that have never tried Netflix because their suggestions for making Hulu great is exactly what Netflix does lol

  • Max says:

    woo thanks Jason!!!
    Clearly you’re the only hope we have in the hulu customers vs networks battle

    where’s the android app and boxee support??

  • Brett says:

    Excellent job on your outlook to the future of television. It was eloquently stated, reasonable, and without a doubt where the industry is moving.

    You are an inspiration for all who embrace innovative technologies, challenge the status quo, and look to the future.

    As an entrepreneurial business student and former employee of the entertainment industry, I wish you the best in all your future endeavors.

  • Brian says:

    THANK GOD. Trying to watch anything on the comedy central site was an absolutely awful experience

  • Kay Lynn Gabaldon says:

    Brilliant! Well said, well done. Go Team Hulu!

  • Well said Jason.

    The one thing I think people have an issue with is paying for video content and receiving ads in that content.

    This is exactly what the cable industry has been doing all along. As a consumer you pay for ESPN, MTV, CNN, etc… and receive advertising. That is the main reason ESPN was able to land Monday Night Football away from ABC after so many years of broadcasting it.

    When you pay for services like a Showtime, HBO, etc… You as a consumer are paying a premium for that channel(s). Those channels give you “Higher Quality Content” ad free.

    This ad free model should be looked at by Hulu as an option. Would you as a consumer pay $14.99/month for premium ad free content?

    What if you modeled the studio content (Paramount, Disney, etc…) like a premium cable channel content (HBO, Showtime, Starz, etc…)?

    Would you pay a premium for “Warner Bros.” content or “FOX’s” content if it were treated like a HBO’s content?

  • JordanN says:

    Thank you for speaking out against the incompetent old guard of the television and movie industry. You’ve stated what has been obvious to my generation.

    I must point out that you missed two additional revenue tiers:
    3) The flat fee, no-ad model (ie: Netflix).
    4) The direct subscription model, where a user directly subscribes to a studio or show.

    In general, the thinner the layer between the content creator and the content consumer, the better the experience for all involved, and this is the direction that the unstoppable army of progress steadily marches towards.

    The people behind the traditional model of broadcast television fear this realization, as they are not ready to be booted out of the game. Thinner distribution means no fat bonuses for them. They stand in front of the armor division of the army of technological progress, trying desperately to slow it down. They are going to get squished.

    Viva la progress!

  • Brad Steffen says:

    Thank you for speaking for the consumer. This is exactly what I was hoping for from Hulu: A “cable” network that directly compensates content creators/owners for the audience their products collect.

    To anyone else that likes this vision I urge you to post a positive comment voice your support before this vision gets buried by the same News Corp execs that keep killing original television on Fox.

    Thank you!

  • Nielsen Families Suck says:

    I like ads, without them we wouldn’t have the old spice guy or joel mchale. i pay for hulu plus & i don’t mind the commercials. the CW shows an almost full amount of commercials on their website & i am ok with it, because i get to watch my show.

  • DVr man says:

    Jason your ad revenue calculation ignores the subscription fee all networks are getting from traditional cable and satellite.content owners can’t survive n ad revenue alone.without the subscription model most likely many of the smaller networks would disappear.

  • Jeff j says:

    Wow biting the hand that feeds it. Brass balls.
    I look forward to the day when more stuff like Scifi ARK “Made for Hulu” makes Hulu a channel of choice for inventive story-telling production houses. Scrape some greats from Sundance.
    Go for it. Hulu is so close to the clout of basic cable edge dayparts and primes that should be a button of the remote on every internet connected TV

    I want a Hulu Button on my TV REMOTE.

    Yes.

  • ishparken says:

    First hoooray! on Colbert/Daily/Tosh.0! Second, I really like hulu. Ive been watching it for years. Probably starting watching very soon after it came out. I havent had cable in about 4 years now, and id have to say it was one of the best choices I have ever made. I really hope you keep Hulu up and running and start tailoring the ads to certain people. So people will get the most of there money and time. Its asham your owned by old school content holders desperate to keep people on cable. It wont happen for long, i know im at the age now where im almost ready for kids, and sure wont have cable. they will get their cartoon somehow. Its up to Hulu to decide of its going to be netflix or hulu or whatever else comes along. please stop screwing your hulu plus service. make it awesome on, playstations, ipads,xbox, google tvs, etc.. just give it out there to everyone, in everyway. Thats what google does with android, crome etc.. cause they all know that money comes back to them with ads from searches. why in the hell would you restrict your costumer base? more people means more ads. Why would you give the plus people less and take it off stuff like google TV? thats a failing busniess model, becuase you make money off ads, yet you wont let people go watch them. I dare you to innovate like your talking about up there, and really do something about netflix.

  • Chris Dunphy says:

    I really appreciate your drive to reinvent TV. And I have been giving Hulu Plus an honest thorough evaluation lately. But honestly, I am having a hard time justifying paying a monthly fee, and still seeing ads. I much prefer the Netflix model of monthly fee and no ads. And if I had an option, I’d pay happily for an online Showtime subscription with no advertising.

    What is really killing me about Hulu Plus is the repetitive ads. If I have to see those same three Geico commercials again, I think I will screen. I don’t mind ads, just STOP repeating the same ones over and over and over and over.

    Good luck with your quest, and I hope you are listening.

    – Chris

  • Melissa says:

    I agree and disagree:

    I disagree about ads. I’d rather watch commercials than pay for content. Like anyone, I don’t like too many commercials, and I hate the really annoying ones. But I already pay quite a bit for TV and I don’t want to pay more. Also, I’d be fine with sharing general demographic info so ads could be targeted to me — I see that as a win-win: more interesting ads for me to watch, and better ROI for the advertiser.

    I do agree about wanting convenience. I have two big beefs about TV networks and the way they schedule things. 1 is the artificial “season” which seems to revolve around their sweeps weeks. And 2 is the competition for the best time slots. So two shows I want to watch (or sometimes 3) are on at the same time slot, and there are other time slots when there’s nothing on that I want to see. What if you just had TV shows all available for one week, and viewers got to pick when they watched them. Then you’d find out what shows were really popular and what times are good times for TV viewing. This is why watching on the Internet is so appealing to me.

  • ozzy says:

    Thank you, thank you, thank you, finally one brave ceo. I do not mind reasonable amount of advertising, but when it is toooo many, not ok. I stopped watching tv, same as I stop using Yahoo due to distracting, annoying moving, too many adds. Companies are killing themselves in the long run while going after short term gain by being greedy. Thank you for being the voice of consumers.

  • Morgan Warstler says:

    I’m struggling to make sense of your revenue per episode for Broadcast Prime Time:

    16 :30 spots during a half hour generating $.216 cents per viewer is $.0135 per spot per viewer, so a CPM of $13.50

    Is this a published number? If not, how did you derive it?

    For most well known shows isn’t well past a $25CPM?

  • Matt says:

    What really annoys me is that Hulu+ has much LESS new content than Hulu. I’m happy to pay a fee, I don’t mind the ads, but realizing that my favorite shows are only available to non-paying web customers was a bitter disappointment.

  • The_Comfy_Chair says:

    First, please bring Hulu to Canada.
    Second, LOVE the Comedy Central stuff… look forward to getting it on Hulu once you come to Canada.
    Finally, An open message to Content Creators/owners/strangleholders;
    Provide your content in an easily available and timely manner for a reasonable price and we will buy it. Fail at any of these perfectly reasonable conditions and we will simply acquire it through “other means”… which generally means no $$$ for you – and yes, that means you too Hulu…

  • bob says:

    Either adapt or die from a thousand stabs of the pirate sword… Your choice. I would personally much rather pay the creators of programs than the distributors… Why engage the middle man at all?

  • dax says:

    From OM
    One Exec said: “If I were given billions of dollars worth of programming, I too could probably build a business,” the person said. “But I know that in order to build a long-term, viable business I would have to do so in a way that works for everybody.”

    I find it hard to believe this CEO being a true innovator.

    He was given a test market to play around with, and now once the owners learned from it, they are now contemplating how to take their toys back home.

    true innovation comes from outside, not entrenched old school manipulations of outdated models…and surely not when your investors are your competitors and suppliers. What a slippery slope.

  • Michael says:

    I’d like to see some more “game dynamics” in the advertising model… it’s a better push towards pay service as well. People don’t just pay with $$$, they pay by providing likes/dislikes, facebook model… for the most part ads today are still TV ad ported to the web for passive viewing.

    For example, “watch this 20 sec ad – answer 3 questions and you get 20 mins uninterrupted, fill out the 10 question survey get 1 hr free, and next show free if you opt-in for something, etc, etc.. Give me a *point system*, for ads watched!!!

  • [...] Hulu CEO Jason Kilar published a blog post that declared that Hulu’s free service is here to stay, Hulu will “generate higher [...]

  • R.. Miller says:

    I turned in my Comcast cable tv box two weeks ago. I kept Comcast’s internet connectivity for the speed and the promise of streaming custom content to my desktop and living room. I’m really interrested in the lean back experience, just don’t think it’s there yet, but hoping it’s in the works.

  • @coffeewithian says:

    Too bad the one show I would be willing to pay to subscribe to Hulu Plus is not there.

    Chuck.

    I missed a few early season episodes, thinking they’d be available on Hulu, or Hulu Plus, or NBC.com or Netflix or even iTunes, and would be able to catch up at any time.

    Yet, NBC and WB are only allowing 5 episodes of the current season. Anywhere. This is a show that’s been on the bubble every season its been on. I want to catch up now, legally. However, I can’t…

  • Soal says:

    BRING HULU TO CANADA!!!!!

    @soaljack

  • [...] Comedy Central and Hulu have patched up their relationship, and episodes from The Daily Show and Colbert Report re-appeared on Hulu this [...]

  • [...] shows The Daily Show and The Colbert Report will reappear on the online video site. With the same blog post announcing the Viacom deal, Hulu CEO Jason Kilar issued a lengthy defense of his company’s business model and the value [...]

  • Nick says:

    Hulu, cable companies, major networks, and other digital content provides only care about one thing. I’ll let you guess what that is — but lets just say it’s not the consumer.

  • mike i says:

    so if I understand your graph correctly the free portion of Hulu makes a pretty tidy sum of ad revenue. Now imagine if you allowed Android tablets and Googletv to access it how much more revenue you would bring in. let’s be honest the fact that folks can access you site with a desktop, laptop, HTPC or Mac Mini hooked up to a TV is fine but somehow GoogleTV or other android device with HDMI out is a threat? I have no problem with the limited commercials in the free ad supported side of Hulu, but I want to be able to access it on all my devices, not just the laptop. Now start working on a Wii Hulu channel (not Hulu+, Hulu) because Netflix on Wii, XBOX, PS3 is so easy and affordable.

    as for Hulu + if I pay for the access I would expect no ads. until the ads are gone I would not consider subscribing.

  • Rabbit Ears says:

    Do I dislike ads? Sure. Is it difficult for me to schedule time to catch a show when it originally does? Yes. Am I willing to pay another monthly monthly subscription fee to watch a couple of programs? No way.

    What all of you online distributors don’t get is that people say one thing but when it comes to having to put the money where their mouth is, they won’t. “Oh, we HATE all the ads on broadcast television! They ruin the program! What? You want us to pay for it? Why would we do that, we already get it for FREE! We’re already paying a cable bill, we’re already paying an ISP bill, online content should be free, yadda, yadda.” These are the same people that believe they don’t have to pay for online news or illegally download music. This is who you are trying to convert to your subscription model, not the Hulu+ faithful.

    Ever watch a local PBS fund drive? Of all the people who claim to love PBS and watch the commercial-free, high quality programming, only a miniscule fraction actually pay to become members. If there was an outpouring of financial support, then PBS wouldn’t need local, state and government funding. Again, you know the saying, “Money talks…BS walks.”

    My solution to the networks is simple.

    Combine online viewing stats with your broadcast ratings and adjust your advertising rate card. Build into the ad rates the cost of streaming and then from your own sites, stream what you broadcast over the air. From your own sites NBC, CBS, ABC, Fox. Forget about the Hulus and the Netflixs of the world.Too many cooks spoil the broth and eat into your margin.

    And for those of you who don’t like ads, tough sh*t. The only way for advertising to go away is for you to buy the DVD. Or better yet, borrow it from the library for FREE for a five days.

    If HBO was smart, they’d offer subscriptions to their content directly. Pay HBO Online and watch the programs online. MLB.com has got this figured out, I’m surprised all you media boneheads don’t. All you’re doing is removing the cable company as a middle man. But don’t feel sorry for them, they’re just going to eventually turn into broadband providers anway.

  • Smackydoodle says:

    Reading between the lines, one part of your post is pretty clear. You can’t compete with Netflix and you want the content providers to charge them more, which will cause Netflix subscribers to pay more, and you hope that causes people to run to your service. Thanks for standing up for the consumers…

  • Seba says:

    @We are extremely happy [..] The Daily Show

    Me too! Great news!

  • A.A. says:

    Received the following reply from Simon Gallagher, who is your director of international business development:
    Thanks for your email and your interest in Hulu.
    We are actively exploring opportunities to launch our service in multiple countries around the globe and due to the confidential nature of those discussions I am afraid we can’t comment on individual markets.

    This seems to confirm plans to eventually offer Hulu in countries other than the US and its territories-could this be part of Hulu’s future?

    Personally, I am hoping Australia and Canada are 2 countries that could have Hulu in the future.

    Australia in particular, Australia was identified by Hulu in early 2010 as one.

    Also great to see some Viacom shows comeback to Hulu.

  • KumaSan says:

    Numbers look suspiciously low. Consider a $10 CPM. With 4 to 5 ads per show how does that equal revenues of $0.0143? Is Hulu more profitable than they let on?

  • Colin Anderson says:

    Thank you Jason. I am glad to hear you guys plan to keep the “free” side of Hulu going. This should be required reading for all of the complainers on the boards!! Peace.

  • Don says:

    Awesome news. THANK YOU!

  • Conner Boyd says:

    Wow. This is a fantastic post.

    Thank you, Jason, for sharing yours and the entire Hulu Team’s vision with us! As a Hulu+ subscriber, I’m rooting for you!

  • [...] days after the on-air premiere. “Welcome to Hulu Plus, Snooki,” wrote CEO Jason Kilar on the Hulu blog. Categorized under Hulu, Hulu Plus, Jon Stewart, Stephen Colbert, The Colbert Report, The [...]

  • Girish Rao says:

    Fantastic post Jason. So refreshing to hear this kind of sharp insight in a market as aged as television.

    I’m a fan of Hulu, I think you guys have great content. I’m curious what your thoughts are regarding competitive online distribution sites, such as DISHonline and iTunes? Both have different use cases and business models, but in the end they offer the consumer new ways to access content, including rental and purchase of content. Do you see these other types of revenue streams in Hulu’s future?

    Lastly, any comment on when live events (ex. sports) will come online? I think live events is the last pillar to fall and once it does there is no reason to own a dedicated TV.

    Thanks!
    Twitter:_girishrao
    Web:girishrao.wordpress.com

  • C. Scyphers says:

    I understand that advertising is a large part of the Hulu business model; however, I would be willing to pay a premium to skip advertising start to finish. So what about a tiered subscription model (Hulu Plus Plus?) that has no ads whatsoever for $25/mth?

  • Andy from Hulu says:

    Kevin, it takes a bit longer for newly published content to be accessible on Roku and some other devices than it does for the web–not much of a gap, but a small one. It should be available now. Please let us know me know at andy at hulu dot com if you are still having issues.

  • Jimmy James says:

    I prefer watching The Daily Show on thedailyshow.com

  • Dain Binder says:

    This is great news and I am starting to smile a little as a Hulu Plus subscriber. There is still work to do, but this is a step in the right direction.

  • This is great. I used to watch the Daily Show all the time, but have not watched a single episode since it left hulu. Keep up the great work!

  • Kevin says:

    Congrats, very psyched! Not seeing them on my Roku box yet… Coming soon?

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