NBC Universal and News Corp. has pulled the wraps off their joint venture, Hulu.com, an expensive and aggressive bid to transfer the free ad-supported TV model to the Internet.
Hulu.com unveiled its public beta version today, with most of the features it promised last spring, including the ability to share entire shows and clips of shows, as well as easily upload them to personal webpages, blogs or MySpace.com.
Hulu.com faced some initial skepticism in the marketplace and was unable to expand its content offerings beyond that owned by News Corp., NBC U and one of the venture’s main distributors, Comcast.
But on the eve of the beta launch, Hulu.com announced deals with Sony Pictures Television for 40 TV series and MGM for an undisclosed number of TV skeins and feature films.
Like Apple’s iTunes, Hulu.com is testing consumer interest in watching TV and films on home computers both through Hulu.com, a new consumer site, and through established portals signed on as distribution partners including Yahoo, MSN, AOL and MySpace. Unlike iTunes, everything on Hulu.com will be free and ad-supported.
The service, shown to journalists and analysts last week, does not permit users to upload their own content or alter studio-produced video — a distinction between Hulu.com and Google’s YouTube, which tapped an enormous market for amateur video online.
“This is all about premium content,” said CEO Jason Kilar, hired from Amazon.com to top the venture over the summer. “We wanted to make it as easy as possible to watch the stuff … and make sure that the content could run free.”
The vast majority of the content offered through Hulu.com are network and cable series from the venture’s two owners, News Corp. and NBC U, including series such as “24,” “30 Rock” and “Kitchen Nightmares.”
Episodes will run with two minutes of ads per half-hour that are unskippable and travel with the video whether it is viewed at Hulu.com, a distributor or a personal webpage.
In addition to TV episodes, Hulu is rolling out with 10 feature films from the Universal and Fox libraries, including “Sideways” and “The Blues Brothers.” They sport embedded, unskippable 15- and 30-second ads, as they would if they aired on basic cable.
NBC U and News Corp. are committed to funding Hulu.com to the tune of $60 million a year. The venture confirmed reports it added a $100 million equity investment from Providence Equity Partners.
While the service is sure to please Madison Avenue, which sees online video as the best way to reach young people not watching TV, the biggest question facing Hulu.com is whether consumers actually want to watch TV on their computers.
Much of the content on Hulu.com is, after all, readily available to anyone with digital cable TV service.
“What’s revolutionary about taking TV content, making it available on the Web so you can stream it on your computer so eventually you can watch it on your TV?” asked Todd Dagres, principal of Boston-based Spark Capital.
Dagres is invested in Veoh, a bet on user-generated content. “Eyeballs are shifting away from TV,” he said, “not because people want to watch TV on their computers, but because they don’t want to watch TV.”
As popular as YouTube fare became, Madison Avenue found it difficult territory for video advertising and is much more comfortable doing business with the major studios that carry much of their ad dollars on TV.
Should Hulu catch on, it could accelerate the shift of ad dollars to online from broadcast and cable TV. Forrester Research estimates that marketers will spend $471 million on online video advertising this year, with about that amount transferred directly from broadcast and TV ad budgets.
But as with broadcast TV, there is no guarantee ads are being watched, and Hulu.com chief Kilar conceded the venture will get no advertising revenue unless a consumer actually watches the advertisement.
“I personally believe a lot of people will be window-shopping,” Kilar said, referring to viewers who jump from clip to clip without necessarily watching an ad. “That’s not a customer session that will be generating revenue.”
Significantly, Hulu.com doesn’t support Apple’s new generation of net-connected iPods and iPhones, which use Apple’s streaming format Quicktime and not Adobe’s Flash format, which plays on all common computer operating systems.
Analysts briefed on Hulu beforehand were generally impressed with the sophistication of the interface Kilar’s team produced and the ubiquity the service allows in the distribution of content.
“Honestly, they’ve overdelivered and gone further than I expected, especially for the beta version,” said Forrester’s James McQuivey. “They are really serious about sharing the content. Usually, there is a contingent (network lawyers) that says, ‘We’re not really going that far, are we?’ ”
Going forward, Hulu.com will have to convince content owners to release their most popular shows to the service in order to maximize its appeal.
CBS passed on an offer to invest early on and instead pursued an online syndication strategy with partners including Joost and Bebo. CBS Digital chief Quincy Smith is a believer in shortform content and has made acquisitions along those lines with Wallstrip.com and Dotspotter.com.
Still, he left the door open to a partnership with Hulu.com.
“If Hulu does well, it’s pretty good for us, and we’ll just embrace them,” he said.
ABC has invested millions in its own video player and distribution strategy, as well as its partnership with Apple’s iTunes, and is thus far distributing free content on AOL.