NBC-Fox Online Video Joint Venture Hulu Attracts Critics
Investor's Business Daily, October 25, 2007
As NBC Universal and News Corp. (NWS) prep their Web site Hulu.com for its first major close-up with a test launch next week, the picture isn’t pretty, say some people in the industry.
The site will dish up episodes of TV shows from General Electric’s (GE) NBC and News Corp.‘s Fox networks, and more.
But some observers foresee failure. They say it suffers from not enough content and from having two partners that are rivals with poor track records in partnerships.
“The odds of it succeeding are low,” said Todd Dagres, general partner of venture capital firm Spark Capital. Spark has invested in digital media companies, including video site Veoh, a Hulu rival.
It’s uncertain yet just how much content NBC and Fox will put on Hulu. In any case, it’ll be “a drop in the bucket in terms of the video entertainment available on the Web.”
There also is the challenge of getting rivals NBC and Fox to work cooperatively on Hulu, he says.
“The two networks will constantly question why their stuff isn’t higher up the list or promoted more, so as to get as much revenue out of that content as possible,” Dagres said.
Analysts have viewed the venture as a bid by NBC and Fox to take on the popular video Web site YouTube, owned by Google. (GOOG)
The joint venture was unveiled in March at a lavish press event that included News Corp. President Peter Chernin and NBC Universal CEO Jeff Zucker.
A Game Changer?
“This is a game changer for Internet video,” Chernin said at the time.
Microsoft’s (MSFT) MSN, Time Warner’s (TWX) AOL, News Corp.‘s MySpace and Yahoo (YHOO) will support the venture by making content from Hulu available through their respective Web portals.
In August, Providence Equity Partners invested $100 million in the venture for a 10% stake, thus placing a $1 billion valuation on Hulu.
But some analysts say the site will need a much wider selection of content in order to draw many people away from YouTube and other video sites.
That, in fact, appeared to be the plan.
Viacom (VIA) was invited to join but declined, sources said. Reportedly CBS (CBS) and Walt Disney (DIS) also were invited.
But besides the Web portals, Hulu has received support in the industry. In April, cable leader Comcast (CMCSA) said it would have a link to Hulu on its Comcast.net Web site. It also will put some of the content of cable channels it owns, such as Versus and Golf Channel, on Hulu. In May, cable channels Fuel TV, Oxygen, Speed, Sundance Channel and TV Guide said they also would make content available on Hulu.
Some doubt that content will be enough to make Hulu a winner.
YouTube Clear Leader
“They are trying to make it a destination site when a million others are already out there,” blogger Peter Kafka said in an interview. He writes on the Web site SiliconAlley.com.
Kafka listed four main points against Hulu: It’s going up against an entrenched competitor in YouTube; it’s shunned by CBS, Disney and Viacom; it’s a venture of two companies that hate each other; and it’s about two years too late.
An executive in the digital media field, who spoke on condition of anonymity, also was critical.
“Strategic partnerships are always a challenge and most don’t work,” the executive said. “I think this one is likely to achieve little to moderate success, based on the nature of the two involved.”
Hulu spokeswoman Christina Lee says Hulu is committed to an October launch. She also says Hulu will continue to work to bring more media companies aboard.
“We want to be a premier destination for premium programming across a variety of partners,” she said. “We think there is tremendous value in aggregating content from a variety of content providers.”
As to the partners, “They have similar goals in mind and a similar vision,” Lee said. “There is a lot of value for the aggregation of premium content and making it widely accessible. With that same goal in mind, things are going well.”
Still, Hulu has plenty of critics.
“Hulu has had bad vibes from the start,” said another digital media industry executive, who also spoke only if not identified. “It’s not clear from what NBC and Fox have said about Hulu to know for sure what the true intent of Hulu is.”
Amid the challenges, Hulu is being run by someone with no track record as chief executive.
Jason Kilar, 36, left behind a successful 10-year career at Amazon.com, (AMZN) where he served in a variety of key roles, to assume the CEO position from George Kliav-koff, NBC Universal’s chief digital officer, who was serving on an interim basis.
Kilar has maintained a low profile. Lee says he’s given just one media interview since coming aboard in July – to the Wall Street Journal. That story has yet to run.
But Kilar is scheduled to take center stage on Friday, agreeing to brief some news outlets in advance of Hulu’s launch early next week. Lee said Kilar was unavailable to comment for this story because of a family obligation.
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