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Hulu Buyer May Be Getting a Network, Not a Video Platform

Original programs may replace hit shows
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Hulu’s network partners—ABC, NBC and Fox—have had a famously ambivalent relationship with the video venture since its launch in 2008. Now, as Hulu readies itself for a sale with initial bids due on Wednesday, that ambivalence seems to have morphed into a near open contempt, at least among some of its traditional media backers.

Last week, Fox put all of its broadcast programming online behind a paywall—from now on, if you want to watch The X Factor or Glee (and you're not a Hulu Plus or Dish Network subscriber), you'll have to wait eight days to access that show for free online. Fox isn't the only media company putting its content behind a paywall these days, but it still represents a substantial blow to Hulu, which depends on Fox for a large chunk of its ad-supported streaming video content.

Partly in anticipation of more decisions like these (Disney is reported to be looking into a similar arrangement), Hulu—along with nearly every one of its chief competitors in the online video space—has started turning more of its attention to the development of original programming.

Last Wednesday, Hulu premiered a six-episode season of a new original documentary series by Morgan Spurlock called A Day in the Life. It's the latest in a string of similar ventures by major Web video outlets over the last five or so months: in March, for example, Netflix confirmed that it would be developing a David Fincher-directed original called House of Cards starring Kevin Spacey for a reported $100 million. And in May, YouTube announced a major content overhaul that includes a substantial investment in the development of original Web series (the price tag of YouTube’s revamp is reported to be $100 million as well). 

Why the newfound interest in originals? Until now, Netflix and Hulu in particular have built an audience and a respectable library around video content they’ve licensed from traditional media players. But it’s an unreliable model. Depending entirely on licensed content from traditional media outlets forces online video sites to suffer under restrictive licensing arrangements, and the nagging possibility that the shows and movies on which they depend so desperately might one day up and disappear.

In the age of the paywall, premium video is a prized commodity and “original programming [becomes] a key differentiating factor for these sites both for subscribers and [in Hulu and YouTube’s case] for Madison Avenue,” said Keith Quinn, senior vice president of creative development and production at Paramount Digital Studios.

What does this mean for those bidding on Hulu? Whoever claims the site will have to be ready to own a network, not a platform. “Content owners are going to make decisions we respect and have to live with [on licensing],” said Andy Frossell, Hulu’s executive in charge of content acquisition and distribution. “We have to make sure we have enough video inventory that we control.”