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Hulu’s Whole Boxee Controversy

March 14, 2009

Hulu turned one-year old a couple of days ago and it reminded me that I wanted to share a few thoughts on the Boxee vs. Hulu controversy, where Hulu’s content providers asked Hulu to block Boxee from streaming its content. A couple of friends and I had a prolonged discussion about this,  and based on the 100+ comments section in Fred Wilson’s blog , people are fairly passionate in their viewpoints.

Personally, I 100% agree with this move. Yes, streaming TV/film content via Internet is a disruptive technology, and one that traditional media companies will need to embrace, but Hulu’s content providers (NBC/FOX) should be allowed to decide how they want to control their content in the web space. They have no incentive to facilitate Boxee in transitioning “analog dollars to digital pennies” if Boxee isn’t willing to pay to use their content. Because Boxee creates a “10 feet experience”, there is the long-term risk that NBC/FOX revenues gets cannibalized as people shift viewing habits from traditional broadcast to the less lucrative web video stream (assuming no major premiums from more targeted ads). If I were NBC/FOX, why would I let a third party site use my content to hurt me down the line?

The business dynamics of TV/Cable and Digital is also very different than those of the music industry. As consumers, we have to remember that everything has a price. If ad revenue deteriorates for studios when content moves to the web (less ad spots, etc), that means they have less incentive to create higher budget shows. So if you really like shows like Lost, you should be willing to watch (or at least not fast forward) through all their commercials. Because if the show can’t bring in profits, then the studios won’t make them. Instead, we’ll have more cheaper shows like reality shows, where the ad revenue break-even point is much lower.

Boxee is great at what it does (creating a TV experience), but from a business perspective, NBC/FOX needs to protect their current revenue stream from third party companies who want to leverage their content, which will expedite shifting in viewer behavior from broadcast to web. In the meantime, NBC/FOX execs should be working on a strategy to  maintain profits over the next 5-10 years, and define exactly what Hulu will be for them in the long-run.

Speaking of Hulu’s one-year birthday, check out the NPR spot about Hulu with my good friend and former bschool classmate Bobby Tulsiani of Forrester Research. Bobby always has great thoughts and I encourage anybody interested in emerging media to follow his blog. A lot of the ideas above evolved from a discussion I had with Bobby and our friend Mike over brunch.

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