On Hulu and Respect

The Power of Choice

Yesterday, I wrote a quick post on how Hulu really loves ads. In it, I said “I don’t feel like the company respects me as a user.” I’d like to expand on that statement.

I stream content from a Roku LT. On it I watch mostly Netlfix, for which I pay $17.98 for unlimited streaming and one Blu-ray out at a time per month, and Hulu Plus, which sets me back another $7.99. I can’t speak for the experience on other platforms, but on the Roku the Hulu Plus “channel”1 is structured a lot like the company’s Web site. Most of the screen is filled with promoted content, while what you want to get at, the full Hulu library, is pushed to the bottom of the screen. The easiest way to get to a show you want to watch, even if you’ve been watching consecutive episodes of it for days, is to search for it with the on-screen keyboard. Netflix’s channel, in contrast, launches right into a list of everything you’ve watched recently, making it as easy as opening the channel to start watching something. This may be Roku’s problem, it may be Hulu’s, but it’s decidedly the inferior experience.

Then there are the ads. I knew they were going to be there even though I was paying for the service, but I didn’t think they’d be quite as bad as they are. On the Roku, there are significantly fewer ads than on cable or network television. While an ad runs there is a nice countdown clock in the upper left-hand corner that tells you when your program will start. Commercial breaks last anywhere from thirty seconds to two minutes.

There aren’t just fewer ads blocks per episode, there are fewer ads period. If I watch two episodes of the same show in a row (something that seems fundamental to the service), I will invariably see the same ad a few times. It gets annoying and makes me think Hulu barely considered what it’s actually like to try to settle into your couch for hours on end. If they’re trying to replicate the traditional television viewing experience, that’s the lens they should be looking through.

So what about respect? The word isn’t one I introduced into this conversation, it was Hulu’s CEO Jason Kilar. Here it is again:

The innovative Hulu advertising service continues to lead the online video advertising market, with the largest market share of a rapidly expanding market. We have now served over 1,000 brand advertisers in our company’s short history. We are relentless in our mission to be the most effective video advertising service on the planet, which we believe is a function of respecting users and empowering them with tools like Hulu Ad Swap and Hulu Ad Selector.

Let’s break down that last sentence, shall we?

  • We are relentless
    • We work hard, blah blah blah.
  • in our mission to be the most effective video advertising service on the planet,
    • Huh, I thought they wanted to serve content to users like me.
  • which we believe is a function of respecting users and empowering them with tools like Hulu Ad Swap
    • What’s that? “Hulu Ad Swap helps to empower users with more control, while offering advertisers insight into brand effectiveness. The user now has ultimate control and the power to choose their ad experience in real-time. The advertiser will reach a more engaged audience through consumer opt-in, therefore driving higher engagement, brand and message recall, likeability, and purchase intent among users.”
  • and Hulu Ad Selector.
    • “The Ad Selector puts users in control of their current ad experience with the option of selecting between several commercials that they wish to see. More than 2 out of 3 users have opted into this unique experience that has been described by them as ‘innovative’ and ‘fun.’”

Nevermind that Ad Swap and Ad Selector have near identical names and appear to be redundant services, they’re not available on the Roku. As far as I know they can only be accessed from a web browser. Moreover, the only empowering option I get is…the ability to choose different ads? That doesn’t sound all that innovative or fun to me. What is it about this “video advertising service” that should make me feel respected?

In summing up his state of the Hulu post, Kilar offers this:

As just one example, our dual revenue stream Hulu Plus business model enables us to compensate content owners much more than anyone else in the online subscription market on a per subscriber basis. At scale, our model allows us to profitably pay content owners approximately 50% more in content licensing fees per subscriber when compared to other similarly priced online subscription services.

“Content owners” sounds a lot like “content creators,” (e.g. writers, directors, creative folk, etc.) but they’re not. He’s referring to networks and conglomerates like News Corporation and NBCUniversal. Hulu shouldn’t have to foot the bill for Hollywood’s troubled system, but this wordplay still annoys me. Kilar makes it sound like the company is fueling creative work when really it’s propping up a bloated, broken system.

Then there’s that whole issue of “at scale.” It sounds forward thinking, like scaling Mount Everest, but really it’s the best way he can say that Hulu is a lot smaller than Netflix. According to Kilar’s same blog post Hulu has 1.5 million paid subscribers compared to Netflix’s 21.4 million2. So let’s pretend that, today, Netflix pays every content owner $1 per subscriber. That would mean Hulu pays them $1.50 per subscriber. Pretty good, right? Well, the Hulu content owner walks away with $2.25 million; the Netflix owner? $21.4 million.

It’s the phrase “dual revenue stream Hulu Plus business model” that really gets under my skin. They get you at the door and then they get you in the seats. As a user, I could care less that content owners are getting 50% more than when they go with the other guys since I’m seeing 100% more ads. And as a content owner I’d have to wonder why the bottom line boost is only 50% when there are ads on a subscription service. If advertising has been able to sustain network television which is broadcast for free, shouldn’t the payoff be much greater if customers are paying as well?

Advertising didn’t always exist and there may come a day when we don’t need it anymore. Yes, television has a long history of paying the bills by selling detergent and automobiles, but that system was set up in a different era. Now, with bits flowing freely, people are willing to pay handsomely for the content they want. A company that respects me would put me, the user, first.

In the Hulu’s mission statement, they say their goal is “to help people find and enjoy premium video content when, where and how they want it.” That feels disingenuous. Their real goal is to serve ads, and frankly it seems like they’re not too great at that. Perhaps one day their model will be proven wrong and they’ll be supplanted by a company more committed to the needs of viewers. The alternative is that the legacy format of breaking up content with ads, which was invented over 70 years ago, will follow us into technologies that need not rely on it.

Let’s see what happens.

  1. What Roku calls apps or content streams. ↩︎

  2. Source: Netflix’s Q3 2011 results (PDF). They will post their Q4 results on January 25th. ↩︎