This is a Case Study Analysis I completed for Digital Media (ie: Social Media Marketing), an Entertainment Business Course at Los Angeles Film School. I really enjoyed reading about the company Hulu and have since been a subscriber. I look forward to watching the future unfold for the entertainment businesses who are moving towards an OTT service platform.
When Hulu was first formed it was a venture capital joint venture between NBC Universal and Newscorp (FOX), critics doubted its potential, referring to it as “Clown Co”. Mark Hendrickson at TechCunch stated that entering into the streaming market by TV execs would never work, since they aren’t tech friendly and “old media guys just don’t get it.”
The company boasts a tech-savvy CEO, Jeff Kilar, formerly from Amazon.com and a CTO, Peter Feng out of Beijing China. With their team building their product the way traditional tech giants were born, with white boards everywhere and smaller offices spaces, the project unveils, garners attention and grows.
The first beta stage is rolled out in 2008, including over 200 Television shows and 100 films which now includes Lionsgate and the Television arm of Warner Brothers. They further pushed out their brand by having 50,000 the Hulu players embedded on over 6,000 websites, not including Hulu.com.
By 2009, despite the critics, The unnamed company adapts the name HULU for its business. Within 2 years the company gains 40 million unique views. This grabs the attention of 2 more mega industry giants, Disney and ABC. They were also named “Website of the Year” by the Associated Press.
The company cares equally about the content owners, users and advertisers and structures their company accordingly to accommodate each facet. By July, 2009 Hulu had over 170 content partners. The content owners also include content distributors which include AOL, Facebook, Fancast, IMDb, MySpace, MSN, TVGuide Online, and Yahoo! Who can used the developed hulu player into their interfaces. The users are the viewers who sign in using a simple form, while providing some demographic information.
The premium format with Ad Selector was a favorite of movie companies since it allowed viewers to see a full movie trailer if they chose a long ad upfront format.
Competition: Comcast and Time Warner teamed up to create TV programs on multiple devices, all they would need is a cable subscriber log in to view these programs for free. Hulu knew this would be a problem. Eventually TV Everywhere attracted content providers like Starz, HBO and Cinemax. Hulu knew it would have to act fast and make a decision on how to strategieze in order to compete with TV Everywhere and / or other VOD providers.
Currently ranked in second place, Hulu could continue its free ad revenue model. This was a great format for Brand Loyalty and Brand recognition despite the critics. Michael Arrington at TechCrunch even went so far as to say, “Happy Birthday Hulu. I’m glad you guys didn’t suck” at its 1 year birthday.
As you see here the minutes / views fell considerably in June 2009, which is exactly when TV everywhere announced its initiative. In order to keep its numbers up, a second alternative needed to be explored.
As you see here, a subscription model is a great alternative here. Hulu had a very small amount of users as compared to Netflix in 2010. But the opportunity for growth was there, as it would be a great competitor against Netflix.
If Hulu decided to go with option #2, How would they structure their pricing? Would it be competitive with Netflix, Cable, or would they go with a super lowball to gain market share?
Here we see a study of Ad Effectiveness conducted by Hulu from Nov. 2008 through May 2009. The study finds that there customers were happy with their ads, even more so than their network and cable counterparts. This would work in their favor as for brand loyalty, but with this new subscription model, not only would it mean abandoning their ads (which would effect 1/3 of their business – as Hulu considers its customers to be its advertisers as well as its users.)
Try to jump on board and partner wit TV Everywhere - This would be a more difficult campaign. Would Hulu get to keep its fun name? Would it keep its core values? However, a merger with TV Everywhere would most likely be possible given its partners and content providers.
The 2 companies have a very different structure and not necessarily the same customer base. As cable providers could be content owners as well, they would reap the benefits of 70% of the advertising share. But for subscription networks like Starz, HBO and Cinemax, that does not receive revenues from ads, this would change the very way Hulu does business.
Great choice. As you see in this chart, people preferred watching videos online. Hulu came in second place for paid subscription services and they created options in pricing for some ads for a basic package to limited ads for a premium package, giving them diverse revenue streams. However they decided to ditch the free service altogether. This may have alienated their original users a bit, however the availability of content only became more rich due to the increased revenues from subscriptions, which are still competitively priced.
1 week free to start $7.99 month for limited commercials $11.99 Commercial free Additional $8.99 for Showtime
Hulu will become the content owners of their own Original and Exclusive content. This will create a third revenue stream for them.
Thank you for reviewing my case study analysis for Hulu. My name is Nicole Raymond and you can connect with me via LinkedIn: https://www.linkedin.com/in/nicole-raymond-2bb7712a
Or you can reach me via email at firstname.lastname@example.org.
15-30 sec. spots + banners that link directly to advertisers site.
“Brought to you by…” in-stream before content begins + canvas ad
Ad Selector feature lets users choose their favorite ads. Or long ad
segment before content, or scattered throughout.
If you can’t beat ‘em, join ‘em.
Alternative #3 (cont.)
Alternative #1 and Alternative #2)
Hulu should move to a free and subscription model.
New revenue streams
Ad revenue model still intact
Keep the users happy who wouldn’t pay for the
Options for service pricing for limited ads/ premium
Funds generated to create Original content.