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Tuesday, August 11, 2009

Hooked on Hulu

About 18 months ago, HULU emerged as an advertising medium. I was a very early adapter as a user and sung its praises to anyone who would listen. Some friends and colleagues accused me of having Hulu on the brain. I was stunned because it was easier to navigate than any other on-line site and gave me a defacto DVD player wherever I had a laptop. It has all but eliminated my TV viewing other than a very occasional live sporting event.

What is Hulu.com? It is a very rare marriage of Fox, NBC, ABC, and private investor Providence Capital which put up $100 million as seed money. Hulu.com runs current TV shows on the above networks, many vintage TV series and a few hundred full run movies. There is advertising but it is about one fourth of what you see on network TV or cable. You can watch what you want when you want. And, it is currently free to users.

Interestingly, Hulu is making money where other groups such as You Tube, Joost, and Veoh appear to be hemorrhaging cash. Why have they succeeded? Well, as mentioned above the ease of use is extraordinary. Also, their content, largely network TV and films, is in the sweet spot of interest for most people. And, the advertising, while there, is not much of a bother as all breaks are very brief (no more than 30 seconds).

A very interesting phenomenon is taking place with Hulu.com ad rates. It has been reported that Hulu.com CPM’s are actually higher than that of what the networks get for the same shows on air. Traditionally, you paid high rates for top rated shows because they were said to be huge reach builders. “You pay more to get more” was the creed we all lived by. But now, while some branding power exists with Hulu.com, the reach is simply not there. The rationale for the premium for Hulu.com commercials is driven by supply and demand (far less supply for Hulu.com than on air) and also a better chance of your spot being seen. People are saying that Hulu.com is a captive audience. As a noted media researcher recently said about Hulu.com, “you know you have eyes on the screen.” Well, young people often keep several screens open when viewing video and could shift to another when a spot comes up. But most of us will probably watch the brief break.

Now, if you think this post is all about Hulu.com, you will miss my point. Hulu is one example, maybe the best, of what is eroding advertiser supported TV right now. It is something of a hybrid as it offers traditional TV and cable fare but still has a foot in advertising as well. But, because it seems to be holding its audience during commercials, it is getting a premium price for what presently are small audiences.

Stepping back a bit from Hulu, clearly, something is happening out there. Here are a few anecdotal examples:

An advertiser from the mountain states told me that he subscribed to a satellite service that threw in a time shifting device as part of the package. “My wife and I have not seen a commercial in four months.” He is a millionaire several times over and would be a wonderful prospect for a wide variety of products and services. How do you reach him now?

A very nice lady pushing 70 tells me that she now gets entire seasons of TV series from Blockbuster. She watches two episodes a night and sometimes more on weekends. Over the last year, she has worked her way through several series and often does not turn her television on for weeks on end. For someone in traditionally the heaviest viewing demographic, she is now virtually impossible to reach.

Book sales are down in this recession but library usage is up over the last 12 months by 18%. Think about that for a moment. Is your salary up 18%? Has your business billing increased 18% in the same time frame? More damning, is the value of your home up 18% year to year?

Libraries are now carrying a wide range of videos. You can get TV series in most locales for free. Some give you classic movies for free as well and a few provide first run films for a rate about half that of Blockbuster. Still others have no charge for films if returned on time. More people are using libraries to obtain free or inexpensive videos. It hurts ad supported TV.

Personally, I was stuck this past January at home during a snowstorm. I went on Netflix and watched Casablanca, one of my all time favorites, instantly. Normally, a snowstorm would be a good time to catch a light viewer like me spending some time in front of the television. Not in the media world of 2009.

This is heady, almost radical stuff. In the heart of hometown America, many mature people have decided to secede from much of advertiser supported television. These are not the young trendsetters or early adapters to new offerings. They are the people the networks always assumed would watch anything. But choice, easy to use technologies and maybe some education from their children is changing the game and rapidly.

With every passing day, thousands of people of all ages in the US join the “leakage” and escape from behind the once Iron Curtain of advertiser supported television.

You may not be hooked on Hulu yet and maybe you never will be. Many millions are and millions more are finding alternative ways to see video. The tidal wave cannot be stopped.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

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