Hulu’s Big “Surprise”

In a New York Times interview, CEO Jason Kilar let it be known that Hulu is already profitable as it heads into its third year.

For some time, the prevailing view has been that Hulu would never quite scale, never quite get the revenue split it needed, never quite crack the ad problem, etc., and that subpar performance in those and other areas would inevitably consign it to being a marginal undertaking delivering… yes, digital dimes.

Of course, part of the point of having Hulu at all has been as an experiment to see whether, like the bumblebee aerodynamically "proven" not to fly, Hulu might defy traditional calculations and begin proving out an early-stage economic model for internet-delivered, commercially-mainstream video content. This it has done. At Business Insider Henry Blodget does a nice job (with a needlessly apologetic title about eating crow) of itemizing five of the things at Hulu that went better than one might have expected.

We've never believed the "digital dimes" story, and are in less of a rush than most to call the question as to whether Hulu, or commercial online video generally "wins" or "loses." Based on what we've learned so far (and we hope Hulu will disclose more), we continue to see Hulu as an evolving, increasingly-successful experiment, a big plus for Hollywood, and a platform that could protect or even increase traditional TV viewing in addition to supplementing it.

In a short series we did a while ago (the Myth of Digital Dimes) we asserted that digital's problem wasn't really profitability, but scale. Hulu, despite it's success, is still tiny compared to real television (something we pointed out here with three big fat charts showing unequivocally how huge and still-healthy linear TV is.

Based on our forthcoming book (Television Everywhere: How Hollywood Can Reclaim the Internet and Turn Digital Dimes into Dollars) we'll shortly lay out a case for why Hulu is actually a central tool for sustaining linear TV in the internet era, what those combined economics might look like, and how linear and digital scale can be more effectively combined.

Stay tuned...