The biggest question mark around the launch of Hulu (GE) (NWS) is if CBS will be a part of it. So far, the answer is a definitive “no.”
CBS Interactive president Quincy Smith (CBS) has expressed great admiration for what Hulu CEO Jason Kilar and his team have built. Smith says they talk almost daily on the phone.
So why is CBS dissing Hulu? First off, money. CBS is cutting affiliate deals on more favourable terms than Hulu is offering. Hulu has come up with a great service, but its content partners must give it 30% of ad revenue. When I last spoke with Quincy, he reminded me that in at least one of CBS’s distribution deals–with Bebo–CBS gives up no ad revenue. Bebo is happy to have the content and build a business around it.
This is significant because CBS says it’s getting a $20-plus CPM for online video–higher than it gets on its TV network in primetime. One reason the CPM is so high is that inventory is limited, but that can remedied by more distribution. Could Hulu help CBS in that regard? No, because CBS doesn’t need Hulu to be on AOL, MSN, Veoh or YouTube. And as of December, CBS was serving more minutes of video on its web site than ABC, NBC or Fox.
Also, by signing on to Hulu, CBS would have to cede at least some control of its third-party distribution. The only way it would do that is if its strategy of building an Audience Network–at last count 191 sites showing CBS video–were a failure. So far it hasn’t been, with meaningful online audiences for shows like “Big Brother” and “Jericho.”
Lastly, Hulu is also incompatible with CBS’s player, which includes messaging, watch lists, and a recommendation engine for video powered by LastFM. CBS doesn’t just want to show videos, they want to own the conversation around them, too. Why would they cede any of that to a third-party if they don’t have to?
Unless Hulu offers terms vastly different than it does to its JV partners, a CBS-Hulu deal seems unlikely. The only way that could change is if Hulu itself becomes a popular destination in its own right, or if the public shows a preference for Hulu’s player over CBS’s, which also seems unlikely.
CBS’s refusal to sign with Hulu, meanwhile, is a big blow to the latter’s chances of becoming the major premium video destination. To succeed as a stand-alone company, Hulu needs to offer most premium video content, and it needs to offer it exclusively. So far, not even Hulu’s equity partners are giving it exclusive content, and many major companies–like CBS–are telling it to get lost.
See Also: Hulu: Great Product, Still Screwed
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