The rise of free online video streaming websites has created several problems for media publishers who are seeking to earn a fair return for their content. Hulu has to change its entire business model because online advertising is not generating enough revenue for the company. Online advertising revenue is very miniscule when compared with other forms of advertising – such as TV advertising. While there is no easy solution to this problem, Hulu does have a number of available options to consider while attempting to generate better revenue. Jason Kilar, CEO of Hulu, can choose to continue their current path by adding more content in hopes that revenue will increase; attempt to break into the mobile media market; or add services to compete in the web 2.0 marketplace (Oruganti 1).
Diversity is the key to any successful business. Apple doesn’t just create computers – there’s the iPhone, the iPod, iTunes – all of which are highly successful. Therefore, it would likely be in Hulu’s best interest to focus on other methods of distribution if they are seeking to increase their overall revenue. Distribution businesses, by nature, are not the most profitable businesses – in fact, it can even be argued that they can be the least profitable forms of business (Oruganti 1). However, Hulu has succeeded in creating a large viewership and has made millions of dollars from online advertising alone so far (Oruganti 1; Callihan). Almost everyone doubted Hulu but in the end CEO Jason Kilar proved them wrong (Callihan; Oruganti 1). However, this does not change the fact that Hulu needs a more sustainable business model if it wishes to last as long as other video content sites; such as YouTube (Oruganti 1).
Going forward, the mobile environment is a new and uncharted territory that many businesses have yet to cross. Smart phones – the only phones capable of performing tasks such as video streaming – are incredibly expensive and are available only to a small percentage of the population. However, as Oruganti (1) noted, mobile users are typically more affluent and are willing to pay for content. Even so, the small percentage of smart phone owners versus the large amount of Internet users could pose a problem. Though mobile users are more prepared and willing to pay for content; there may not be enough of them to generate significant revenue. Despite these challenges, it would appear that Hulu’s best option would be to increase its distribution to other platforms.
It would appear that Hulu has recently made the decision to sell their service for a fee of approximately $10 per month (Orourke). This could have a negative effect on the already-struggling company as many viewers may simply leave and find the free pirated versions of their shows and movies that they were watching before Hulu came along (Orourke). Alternatively, the amount of satisfied Hulu viewers that would be willing to pay for their service could generate enough revenue to outweigh the current business model (Orourke).
Hulu is an innovative media distribution company that must be willing to adapt to the demands of the public – as all media companies do. In order to increase revenue, they have decided to implement a subscription service that could take effect as early as May 2010 (Orourke). Only time will tell whether or not this change will benefit the company or if it will end up like so many others – a brilliant innovation left to the wayside.