Stream This!: Hulu Plus Is No Threat to Netflix
Hulu's announcement of its long-awaited subscription service set off a flurry of speculation that Hulu Plus would compete with Netflix or that it would give consumers more reason to ditch cable. But the reality is that the business models, type of
content, number of devices, and other factors between Netflix and Hulu are very different.
While Netflix says it will be on 100 devices by the end of this year, Hulu looks like it will be on about 10. Devices like the Xbox 360 won't support Hulu Plus until next year. Of course, Netflix's device success didn't happen overnight; it's taken the company 3 years and hundreds of millions of dollars. Since Netflix does not rely on its streaming service to generate direct revenue, it can afford to spend the money and invest the resources to make that offering as good as it is.
Hulu did a little more than $100 million in revenue in 2009, and half of that money went back to the content owners. Compared to Netflix, Hulu has very little money to spend on R&D and can't dedicate the resources needed to work with dozens of consumer electronic manufactures to get Hulu Plus embedded into devices. Even Blockbuster, which is much
larger than Hulu, admitted it doesn't have the resources to work with all the hardware providers that they want to.
That's not a knock on Hulu; it's just reality. Think of it this way: Hulu has been working on Hulu Plus for more than a year, and at launch it will have only a few hardware partners. That shows just how long it takes and the work that is involved in getting a content offering integrated into a CE device.
The other big difference between the companies is the rate at which they move. Even though Netflix is much larger than Hulu, Netflix is very nimble. Talk to any of its hardware partners and they will tell you how easy it is to work with Netflix, how fast they get things done, and how well its service works. Compare that to Hulu, which is not known for moving quickly and is completely new to working with CE manufactures.
In order for one service to replace another or at least compete with it, it means that the competing service needs to provide a similar experience to what's in the market. Hulu is all about short-form content, while Netflix is mostly about long-form content. Yes, Netflix has TV shows as well, but movies are its strength. Netflix has about 12,000 pieces of content, and Hulu Plus will have about 2,000 to start. That's a big difference in the type and volume of content available.
As for those who suggest that Hulu Plus will now enable consumers to "cut the cord," that's just more hype. Hulu Plus and Netflix combined do not offer enough content for the average consumer.
Hulu's new subscription service is very straightforward in what it offers, and Hulu is very clear about where it fits in the market. Hulu Plus is the first step for the company, and this is not a sprint to the finish line. The battle for eyeballs in the living room and across devices is only just beginning, and there is a long way to go before anyone is considered the winner. Hulu Plus is great for the industry, as it gives us another model in the market and will enable other content owners to test
the waters with new forms of distribution.
Will Hulu Plus work? Yes, but not like most people think. Hulu Plus is not meant to replace Hulu.com, only complement it. Hulu Plus won't have millions of subscribers in the next few years, nor does it need to. We should like Hulu Plus for what it is, not for what we think it might be.
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