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Commentary: Long Tail Isn't Wagging Hulu Just Yet

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It wasn't supposed to be this way. When NBC Universal and News Corp. announced in 2007 that they were getting in business together to launch an online home for their TV and movie offerings, it became a laughingstock. Two media companies collaborating successfully? And online no less?

Well, look who's laughing now. Hulu has emerged as an unexpected triumph, home to thousands of top-shelf episodes and movies from more than 100 premium content partners. Although the proud parents of Hulu initially downplayed notions that the venture would be a "YouTube killer," there are already estimates indicating that Hulu is pulling in just as much ad revenue with a fraction of the video tonnage.

But in what might be an act of contrition on the part of the blogosphere that so clearly underestimated Hulu, there is now a countervailing hype enveloping the site.

The Associated Press named Hulu its Web site of the year. Mark Cuban declared "Hulu Kicks YouTube's Ass." Influential blog TechCrunch issued a mea culpa. And if that guy Barack Obama hadn't arrived on the scene, surely Hulu CEO Jason Kilar would be Time's Person of the Year, right?

A look at the latest data on Hulu, however, puts the site's performance into perspective. While unquestionably a success story, the hullabaloo over Hulu needs to be taken down a notch.

A key component of the Hulu hype is the so-called long tail, the notion that the Internet's limitless capacity enables library content to be monetized more effectively than traditional distribution. While YouTube drowns in user-generated content that advertisers won't touch with a 10-foot pole, Hulu has shunned that category to amass an ocean of premium-only content.

Its long tail is a catalog of TV and movies going back decades, and though Hulu is mum on the details, what little the venture has shared about its most watched selections is a testament to the depth of content. If you assumed whatever is most popular on TV is most popular on Hulu, think again; Fox's canceled "Arrested Development" and FX's "It's Always Sunny in Philadelphia" are big draws. Although Fox's "Family Guy" is the No. 1 performer, Kilar has noted that such forgotten fare as "Airwolf" and "The A-Team" hold their own, too.

While touting the viability of cultural arcana is a way of branding Hulu as cutesy and culty, the subtext is clear: This is not a venture dependent on the fickle nature of Hollywood hits. Hulu ensures stability for itself by spreading its points of entry across such a broad range of content offerings.

But some new statistics on Hulu undercut that sense of invulnerability.

October was a record month for Hulu. By Nielsen Online's count, traffic skyrocketed by 76% compared with September to 7.4 million uniques. It was the biggest audience Hulu had registered since coming out of beta in March and its largest month-to-month increase.

Nielsen Video Census, a separate tracking that takes into account streaming data on Hulu's syndication partners and thousands of embedded players, put the count at a personal-best 9 million.

The upticks probably came as no surprise to anyone at Hulu given the confluence of programming additions that were on the site in October. First and foremost, "Saturday Night Live" sketches featuring Tina Fey's Sarah Palin impressions were huge draws, inflated by the fact that NBC Uni was able to keep the clips largely off YouTube and restrict them to Hulu and NBC.com. The election in general was a boon in October -- the homestretch of the campaign season -- which likely lifted the performance of Hulu attractions like "The Daily Show With Jon Stewart," not to mention live streams of two presidential debates.

Adding another ingredient to this perfect storm was the timing of the TV fall season, which gave Hulu an influx of new programming, particularly a selection of NBC shows that premiered on Hulu a week earlier than they did on air.

But now that the numbers are in on Hulu's November performance, October feels more like a lucky aberration than the makings of a hockey-stick-shaped growth curve that would have allowed Hulu to earn its hype. Nielsen Online tracked Hulu falling back to earth at a rate of 33% from October-November; the Video Census showed a 16% drop, and that's a more important metric given that the bulk of Hulu's ad revenue comes from advertising in-stream, not display units.

Hulu didn't carry its October momentum into November. That's not exactly tragic; November still managed to top September, which is a good sign, as is a 7% increase in the number of total streams generated (according to Census). But the key takeaway is that Hulu is not quite the juggernaut some have made it out to be; behemoth status can't be conferred on a site that sees its fortunes rise and fall depending on which videos are new that month. Turns out that having an active long tail didn't guarantee Hulu's growth after all.

If anything, November should wake up Hulu to the fact that its site needs to be programd 12 months a year to maintain steady growth. NBC Uni and News Corp. are going to have to concentrate on hits to stay in growth mode on the site.

The data comes on the heels of a new study from a British economist whose analysis of sales for online singles concluded that 85% of all tracks don't so much as muster a single sale. Ad-supported video is a separate category, but Hulu might find out the hard way that it really isn't all that different.