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DCNF 2014-15

Hulu CEO Mike Hopkins Is Helping Digital Video Get the Respect It Wants

And the hits his company needs

At the moment, Mike Hopkins has the two hardest jobs in online video. The first is as CEO of Hulu (its third in a year and a half), where he’s responsible for a growing over-the-top video business that competes with juggernauts like Netflix and upstarts like Amazon Prime. And his other job is, well, as CEO of Hulu, where he looks out for the interests of owners Fox, Disney and silent partner NBCUniversal, three linear TV giants with huge broadcast networks and dozens of cable channels between them. 

Photo: Rainer Hosch; Illustrations: Bentobox

It helps that Hopkins has a background negotiating some of the toughest deals in the business. He was president of distribution for Fox Networks, negotiating compromises in the increasingly bitter world of affiliate fees between the Fox channels and MSOs like Dish and Comcast.

“The distribution world is pretty rough-and-tumble in terms of getting those deals done,” says Hopkins, who has had to slide into home more than once. In October 2010, he signed one of those last-minute distribution deals that have come to characterize the industry, averting a blackout of Fox’s owned-and-operated broadcast stations for some 4 million Dish Network subscribers just as the satellite service was set to go dark. The previous week, he had stared down Comcast during a blackout in the New York area.

It wasn’t fun.

“It’s gotten worse and worse,” as Hopkins puts it. “The last three or four years it’s been really serious. The numbers are huge and the margin compression that the distributors have is very real.”

The last thing Hulu wants to do is contribute to that compression. So when Hopkins, formerly a member of the Hulu board for Fox, was given the task of managing the entire joint venture—which is constantly in danger of competing with itself—he had the necessary experience of having represented his company’s interests in a tense environment.

And there’s one important reason to keep Hulu afloat from its owners’ perspective: Revenue is on a serious upswing. Last year the company crossed the $1 billion threshold, as Hulu says it has attracted 6 million subscribers to its Hulu Plus service, now an integral part of its long-term strategy, a strategy Hopkins has had a direct hand in shaping.

Last year, Hopkins was on the Hulu board when its owners decided to reverse the internal economics of its advertising. It was a call that settled some longstanding grudges between Hulu and the ad sales reps at its owners, who had never been that happy with Hulu’s buy-your-own-avails approach to its owners: Hulu would no longer own all the ad inventory on its owners’ content and sell part of it back to them. Instead, NBCU, Disney and Fox now directly sell about 90 percent of the inventory on shows they stream on Hulu and sell the other 10 percent to the service.

Though it may sound like a raw deal, Hulu has something no other digital video outfit offers: content from three of the Big Four broadcast networks the day after they air it, as well as fresh content from other networks, including The CW. That content and Hulu’s slate of original programming—including The Awesomes, an animated series created by Seth Meyers, and The Wrong Mans, a British action-comedy—help to drive all-important subscriptions.

The question, of course, is whether a service that provides TV content without a cable subscription can ever be good for programmers who rely on the dual-revenue stream of cable fees and advertising. Hopkins says it is, and that cord cutting is a serious misnomer.

“Nobody can stream Hulu or any of our competitors unless they have a broadband connection,” and frequently, broadband providers also sell cable services, he notes. “We have to work very closely with all of those players, and we’re actively talking to [the multichannel video programming distributor, or MVPD] side, working on them to sell Hulu Plus as part of their offering.”

That is an attractive proposition, potentially. It is costly and time-consuming to develop a user interface and a set of content agreements for TV Everywhere, and Hopkins has experience dealing with the specific needs of cable and satellite companies.

Consumers may not love cable operators, but there’s no denying their power. “They have more people buying their product per capita in the U.S. than anywhere else in the world at the highest prices in the world,” Hopkins says. “We want to work very closely with them. And the majority of our customers are pay TV customers as well. We’re a complementary product for them.”

That last item is a slightly harder sell. Hulu, after all, is one of two or three services that can be cobbled together to form an ad hoc cable subscription that costs a fraction of the price Time Warner or Cablevision demands, and that’s exactly what makes its season-to-date content so valuable. “There are people who are doing that,” Hopkins concedes. “But that’s not our main objective. We’re not trying to get people to cut the cord.”

Hulu’s strategy for its content partners is simple: Use us to drive live viewership. “They have far more girth in terms of programming than we do because they have programming from so many other sources, as well as acquisitions and cable sources,” says Mark Pedowitz, president of The CW. Hulu, he says, gets fans-to-be current, and since his network skews young and favors on-demand content, Hulu is a good complement.

“I’m still a broadcaster,” says. “If broadcast isn’t the place [they’re watching], we hope to have the viewer watch our shows in a way that will bring them back to the same-day telecast.” And it’s not just sub fees. Anything that increases viewership gives Pedowitz and his ad-sales team more GRPs to sell, and TV GRPs are worth quite a bit more than the digital clicks and views on The CW’s website.

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