Hulu learns content is still king

The decision by Viacom to pull its content from Hulu – while still keeping that content online – shows exactly why Hulu is the #2 site for online video.

As Tech Crunch reported, a key factor was the share of the ad revenue – Viacom makes more money by selling ads for video content on its own websites because it doesn’t have to split that money.  At the same time, Viacom can still make clips of its shows sharable and embeddable.

It brings to light a significant problem for Hulu: what value do they really add as a third party service?

Hulu was born because founding parents Fox and NBC were rightly worried about their content being ripped off and posted on YouTube – and because they realized that online video was an entertainment medium that they needed to embrace in some way.  The Simpsons, SNL, Heroes, Family Guy, and other shows from those networks made it on the site, along with content from their cable and feature film properties.  Other media companies, like ABC/Disney and Viacom, signed on as well.

The reason Hulu has always played second fiddle to YouTube is in a distinct difference in their business model.  While Hulu has always been about the content, YouTube has served as the infrastructure for the advent of web video.  In the days before YouTube, putting video online meant thinking about managing huge files and possible paying exorbitant hosting fees.  YouTube’s value to the content provider was allowing people who otherwise could not have done so to share video – whether that meant a cat falling off a bed or an independent short film.

Hulu’s value proposition to its content provider partners appears to be the ability to give them space on a high-traffic website.  But like YouTube and any other online video site, traffic comes because of content.  In reality, high traffic numbers are content providers’ value to Hulu, rather than the other way around.

This doesn’t mean the end of Hulu, of course – after all, the site was started by content providers.  But it may mean that, eventually, NBC/Universal and Fox find that they are the only ones left on the playground.

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