More "Enhancements" to Hulu

Yes, "enhancements" was intended to be sarcastic. The New York Times reported today that the Fox network will begin limiting next-day availability of their shows on Hulu to subscribers of cable and satellite providers. That means, for those thousands of Americans who have "cut the cord" of cable because of alternatives to paid television, they will have to wait eight days -- yep, you heard right -- EIGHT days to watch a new episode of a Fox show on Hulu.

Fox, a partner in the Hulu venture, is attempting to appease cable and satellite providers who fear alternative delivery methods of network television (Hulu, Netflix, AppleTV, Vudu, et al) will continue to eat away at their subscriber base. The quote I love is from a Fox marketing executive who said that this is meant to “enhance the value of pay television to subscribers.” By handcuffing people to their cable provider?

It is clear that Fox -- and ABC network (another Hulu partner) is considering this too -- is following the money. They would rather satisfy the larger, yet declining, income source of cable and satellite providers than the smaller, yet increasing, income source of on-demand streaming television.

Hulu was an early success. Consumers caught on and loved it. However, the continued tinkering of Hulu will turn off consumers who value Hulu because of its simplicity and content availability. Mess with either of those, and it will fail. I urge the TV networks to remember the old axiom, "The customer is always right."

The Long Tail of Video

In "The Long Tail," Chris Anderson outlined the untapped audiences that exist beyond mass media targeting. Waves of consumers who participate in niche media and markets, in aggregate, can be greater in size and more valuable than the traditional "mass media" audience.

The same holds true for video as well. When people think of online video, two  sites come to mind: YouTube and Hulu. Indeed, both of those sites have a huge number of videos viewed per user (96 videos/viewer and 26.7 videos/viewer, respectively). However, a comScore study shows that more than half of the online video minutes viewed are being viewed on video sites ranked #26 and higher. The long tail of video site is garnering more than half the total online video viewing.

The important takeaway is that your online video strategy shouldn't begin and end with YouTube. As my colleague Paul Dyer points out, YouTube should be only one part of your video marketing mix. You need to be wherever people go to view video, and that isn't always YouTube.

The Underrated Hulu

It's no secret that I'm a fan of Hulu, the on-demand premium video service brought to you by (most of) the big TV networks. When my DVR burps and misses an episode of South Park, there's Hulu. When my wife and I try to record three concurrent TV shows, there's Hulu. When my kids want to catch up on old "Wallace and Gromit" episodes, there's Hulu.

For TV fans, it's a dream come true. Nearly everything (see Boxee) they've done with the service, they've done right. In fact, I don't even mind the short and infrequent ads that run during the normal commercial slots. I've even rated a few. A paltry 30-second interruption while watching "Flash Forward" is pittance for the benefit of free, on-demand, scripted premium content. Let's take a look at the other benefits:

1. A typical hour-long program (which takes an hour to watch live) is presented in just over 45 minutes.
2. You can pause it -- easy now, DVR fans -- AND you have completely random access to any part of the program. No fast-forwarding or rewinding like a DVR.
3. You can watch it on any Internet-connected computer.
4. If you log in to Hulu, it will remember where you left off watching a program.
5. You can share a show or even a portion of a show using an intuitive editing tool.

I could go on with some more benefits for consumers, but what I've left out is the major benefit to advertisers. YOU CAN'T SKIP THE COMMERCIALS. Let me say that again ... no, just go back and read it again. In an age where everyone seems hell-bent on skipping advertisements (from pop-up blockers to DVRs), the prospect of skipping television commercials is terrible and terrifying for both producers and advertisers. The reason we have "free" television (disregard cable, satellite, and fiber bills for a moment -- there are still free over-the-air signals floating out there) is because of the commercials. If no one watches the commercials, then there will be no more free television. There, I've said it.

So what to do? The DVR floodgates are already open. Forty-four percent of viewers of "The Office" watch it via a recorded version. More than 30% of U.S. viewers have DVRs. There's no unringing this bell. The next logical, albeit unwelcome, step will be to disable fast-forwarding of DVR-recorded programming. Rewind and jump-back will remain, but I believe this is part of the reason that Apple released the iPhone 3.0 software with a 30-second jump-back button but none for jump-ahead, for which Leo Laporte expressed thanks on his ad-supported TWiT podcast.

So how does this relate to Hulu? As I stated earlier, you can't skip the commercials. And you know people are watching them. Who's going to go for a bathroom break during a 15-second State Farm commercial? It stands to reason that ad rates on Hulu seem to be around $10 - $15 higher than their television equivalents, but I'm surprised it's only that much higher. If I had an advertising budget burning a hole in my pocket, I'd be taking a serious look at Hulu for these benefits:

1. Only 1 spot per commercial break, so your ad stands out more.
2. Commercial breaks are only 15-30 seconds long, so people are paying more attention.
3. There's an always-present banner ad that complements the video ad.
4. Your ad is being seen during the day/time that you intended for it to be seen and not when it was recorded and then later played. Who cares about an movie ad on a Monday or a college football promo on a Sunday?
5. You can get feedback (like/dislike) on your ad.
6. You can have one creative be shown to women and another to men for the same show.
7. In case you missed it earlier, you can't skip past the commercials.

I see Hulu as a win all around, whether you're a view, producer, or advertiser. If you're the latter, give it a whirl.

DISCLOSURE OF MATERIAL CONNECTION: 0

Online Video Viewership

According to a recent comScore finding, the average U.S. online video viewer watched more than 5 hours of video online in February 2009. Of note is the jump in ranking of Hulu as a destination for online video consumption -- and more importantly -- premium content.

In February, Hulu jumped up to the #4 spot among the top online video properties. Google continued to hold the #1 spot with nearly 41% of the share of videos viewed with YouTube accounting for more than 99% of that (no surprise there). In a distant second and third, respectively, are Fox Interactive Media and Yahoo. I found it interesting that apparently so many people still watch videos on MySpace (a Fox Interactive Media property) that it keeps Fox ahead of Hulu (a joint venture between Fox and NBC/U).

Expect to see Hulu continue to rise in the rankings now that Disney is in talks with Hulu to air its content. Disney seems to be taking the "if you can't beat 'em, join 'em" approach with this. This means that Hulu will prospectively have 9 of the top 20 rated shows (w/o Mar 22), which is quite a feat, considering CBS alone holds the other 11 shows in that list. In one online destination (with a great user experience, by the way), you'll be able to watch such powerhouses as The Office, 30 Rock, Lost, Desperate Housewives, Grey's Anatomy, House, 24, American Idol, Dancing With the Stars, and the list goes on. Who needs a DVR?

CBS Interactive seems to be struggling with their online video property, TV.com. They currently have 0.9% of the viewing audience. I'm not a fan of the TV.com user experience, which is why I credit Hulu with its success. Long term, I expect CBS to bite the bullet and offer their content on Hulu. Let's wait and see.