For years, the economics of the television industry have hinged on the networks’ role as the gatekeepers of the content they created. Now, the rise of a new delivery system, the Internet, is creating some uncertainty over how long the old rules will still apply.
The latest threat could come from Hulu, the second-most-popular site for free online video. A reportedly planned change to the site’s revenue model raises new questions about the outlook for television companies.
Today, Hulu offers a menu of free streaming TV episodes, movies and clips for free, but the site plans to start charging a monthly subscription fee of $9.95 to access its full archive of videos, according to recent media reports. The last few episodes of most shows would remain free.
For some viewers, the availability of high-quality full episodes of their favorite shows online could present an opportunity to scale back or even cancel their increasingly expensive cable service. For investors, Hulu’s growing popularity adds fuel to the debate over whether the Internet could undermine the business model of television’s content creators and distributors.
Hulu is jointly owned by NBC Universal, News Corp. (NWS) and Walt Disney (DIS). (SmartMoney is also owned by News Corp.) The site opened to the public just two years ago and has already become a significant part of the online video ecosystem. In 2009, the total number of minutes of video viewed on Hulu grew 140%, according to comScore (SCOR), an Internet market research company. As of March 2010, the site was second only to Google‘s (GOOG) sites (including YouTube) in total number of videos viewed.
Analysts who study media consumption say the business of creating content won’t change substantially any time soon. For the foreseeable future, “the reality is beginning to set in that the revolution will continue to be televised,” says Brahm Eiley, the founder of the Convergence Consulting Group, which focuses on the Internet, telecom and content industries.
Here’s a look at Hulu’s potential impact on the TV business:
How Hulu Could Kill TV
One clear threat to the television networks is a potential loss of advertising. If viewers watched their favorite shows on Hulu instead of on TV, the networks would make less ad revenue. Hulu content includes some ads, which would benefit the networks, but only about four minutes per hour. A comScore survey suggests viewers are willing to accept six or seven minutes of ads online, but that’s still far less than the 16 minutes of ads shown in a typical hour of TV viewing.
Similar Posts:
- Online TV and Movies Get Cheaper (Deal of the Day)
- Tony Robbins’s Seven Steps To Breakthrough
- Trust Me…I Write a Blog
- Get Rich Click! The Ultimate Guide to Making Money on the Internet Book Review
- Media to tech giants: Help us make money!
