/// How Hulu Might Change—And How It Probably Won’t

August 20, 2012  |  Media Week

It's been a busy Monday for Hulu—the company has been dogged for months by rumors that CEO Jason Kilar is eyeing an exit, and that its days of distributing exclusive day-after content from the major broadcast networks are numbered. Today, a memo obtained by Variety's Andrew Wallenstein seemed to confirm the latter rumor, and while Kilar's exit is by no means assured, the soon-to-close buyout of equity fund Providence's 10 percent stake in the company (valued at $2 billion) would reportedly leave execs like Kilar in, at the very least, a very good bargaining position. And it would leave the streaming service in what some have characterized as a much weaker state: when Disney and News Corp buy out Providence (the deal is set to close in September), some of the key principles that have made Hulu competitive will be altered. Hulu could lose exclusivity on its third-party content from broadcasters Disney and News Corp. (NBCU lost its ability to influence Hulu's decisions when it merged with Comcast, though its content is still broadcast on the service), meaning that Disney, for example, could air ABC shows first on another third party's application. The door would be open to more competitors, and rights to syndicate the content beyond Hulu's own service (to other providers like AOL and Yahoo) would revert to the content owners, and Fox would be able to insert a fourth commercial per pod. Here's the thing: Yes, those are sweeping changes. But they do not materially affect Hulu's market advantages, at least not in the current market, and not if everyone involved has his head screwed on right. Hulu is a company with a huge advantage over every other over-the-top distributor: it provides programming within, at most, a few days of the original over-the-air broadcast from three of the four biggest broadcast networks and several cable networks. An extra ad or two on the Fox programs won't change that; nor will non-exclusivity. The latter might mean that Disney, News Corp and Comcast could drive a harder bargain when it comes to the percentage of ad inventory, for example, that Hulu's allowed to sell, but Hulu has been the only—the only —ad-supported streaming video service to aggressively court television advertisers with ratings they can understand and purchase confidently, and that strategy has paid off in spades. Advertisers love the service and are willing to pay high CPMs, which is its entire point. And even if Hulu's shows become available on third-party services, It's unclear who those would be— YouTube's TV app just rolled out on PS3 last week , and advertisers are loath to jump head-first into the new YouTube system, in which Google both sells ads and measures delivery

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