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Monday, August 17, 2009

Netflix vs. Hulu

ABC reached an agreement with online video rental outlet, Netflix, which allows Netflix to carry streaming episodes of ABC's most popular shows. The first, Lost, is available now and will eventually include all five seasons. Future ABC shows that will appear on Netflix include Desperate Housewives and Grey's Anatomy.

Hulu, originally a joint venture between NBC Universal and FOX, has been the hot topic since its launch; though very young, Hulu was the third most popular website in the first quarter of 2009. More and more people are discovering the joys of watching streaming content on-demand, but Hulu delivers that in spades, with hundreds of film titles (movie and TV) in every genre, from the earliest days of film to shows that literally just aired (generally, the night before). Hulu also hosts a lot of shows created specifically for the network, including original comedies, documentaries, and more.

Disney/ABC just inked a deal with Hulu this April, giving Hulu exclusive rights to broadcast some Disney/ABC content on it, as well as its satellite and sister sites, including AOL and MySpace. According to sources, the deal with Netflix will not upset this, as the ABC :: Hulu agreement refers to newer content.

The wording leads some to conclude that ABC, which obtained a 28% share in Hulu in the aforementioned negotiations, will be licensing the majority of its back catalog to Netflix, which has been offering subscribers mostly obscure programs, as well as a limited number of movies and rental titles (direct-to-DVD), for some time now. Some say this is because all the major networks (except CBS) are part of Hulu, but The Cyberculturalist notes this may also be a planned strategy: Netflix knows Hulu dominates the television-on-demand market and wishes to remain primarily a video rental site (the market which Netflixdominates), so Netflix may be maneuvering for the "alternative," or "indie," crowd.

There is some crossover between the sites, as Netflix is now airing some TV, and Hulu offers some movies (uncut, though interrupted by commercials). Netflix could find a very profitable niche, should it become "the" site for the "alternative" crowd, as it would technically be "alternative" to Hulu. Netflix may then continue focusing its traditional marketing efforts on its film-rental services, while tailoring its online menu to target this demographic. Because, if Netflix begins advertising the fact that it serves the "alternative" crowd, it will be considered "mainstream," which would give another site the chance to then fill that niche - including Hulu. Further, by not drawing attention to this entire concept,, Netflix can avoid building what would surely be a high-profile rivalry. Of course, such a rivalry may yet arise regardless, in which case, targeting the "indie" crowd may prove Netflix' only leverage.

At any rate, Netflix' success is going to be monitored even more closely now, because it is a subscription-based model. And that brings up another selling point which Netflix may employ: no commercials. All of Hulu's videos include commercials; while they are generally interrupted every quarter-hour (15 minutes) or so, every show, movie, et.al., is at least bookended by commercials, usually from the same sponsor. Sometimes, the user is asked if he wants to see commercials throughout his selection or if he'd rather sit through an extended commercial before his show begins. Netflix has none of this; the streaming media it offers is for customers only, and Netflix customers pay a subscription rate of about $10/month.

ABC started showing some series on Netflix in late 2008, including Hannah Montana, Wizards of Waverly Place, The Suite Life on Deck, and more. ABC has been showing its flagship programs on its own website, and through its own media player, for some time now. Their decision to license broadcasting to other sites was made to attract viewers aside from

YouTube, owned by Google, courted Disney/ABC, but only landed the rights to clips from shows and sports broadcasts from ESPN. Sources close to that deal say talks broke down because Disney insisted on a stake in the company - the stake they got in Hulu. Jeff Zucker, President of NBC and a Hulu boardmember, suggested that advertisers "want a safe environment, unpolluted by videos of cats on skateboards," and that this, coupled with the fact that "Hulu has generated a user experience that is second to none," is what has made Hulu "the pre-eminent video site."

(This article was originally scheduled for posting on Aug. 4th)

© C Harris Lynn, 2009

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