It's a little disappointing that we're even having this conversation at all. Online content should be so much more valuable than broadcast content, both to consumers and advertisers. And yet, online is still the red-headed stepchild.
Online content can target ads individually! I've filled out the survey on Hulu, they know that I'm a guy, my age, etc. They probably have pretty good guesses about my income and my interests. The full set of shows that I watch paints a pretty detailed picture of who I am and what I like. In an ideal world, they could use that information to show me very precisely targeted ads.
That famous quote, "Half the money I spend on advertising is wasted; the trouble is I don't know which half." is probably mostly right, except I'd bet that it's a lot more than half that gets wasted. And Hulu should have the ability to fix that, by individually targeting ads! But they're still showing me, a fairly nerdy guy, lots of Febreze ads and Glade sense & spray ads and even the occasional tampon ad or whatever.
Google is proof that precisely targeted ads are really, really valuable. And I think targeting ads well even makes them less annoying; if you're showing me something that's actually relevant to me, I feel less like my time is being wasted. But Hulu and its advertisers still haven't figured out how to match up ads and users.
It's sad. But whoever actually solves this problem will make oodles of money.
The major difference is ad load. Watch a 1-hour show on Hulu, and you'll see that the content is typically ~42 minutes long. Which means that on-air, it's 18 minutes of ads that fill the balance. But online is showing way less ads than 18 minutes. Even with 4-5 ad breaks, you're watching, at most 2 30-second ads per break. In online streaming, revenue per ad (CPM) is competitive with TV, but revenue per viewer is much lower.
Also, targeted advertising isn't a panacea. I agree it can be better, but if you're a big brand spender like McDonald's, Nike or Target, you're targeting just about everyone. Gender, age, income, and interests matter a whole lot less.
Not that it makes up the whole difference, but Hulu shows about twice as many ads as you're saying. The typical hour-long show has 4-6 ad slots (including beginning and end), and they average 60-120 seconds (with a rare ad group over 2 minutes), not 30-60.
You're right -- thanks. They've been slowly increasing their ad load every year since they've launched, and it looks like they're doing three ads in a break now for some shows.
Maybe TV advertising is a speculative bubble for big brands just as interested in "branding" than measuring any kind of conversion funnel, the second they get onto something like Hulu they can much more easily see a campaign failing.
The other aspect could be that online TV show streaming is still new technology and the early adopters are the same kind of people that don't respond well to traditional TV advertising.
Online content should be so much more valuable than broadcast content, both to consumers and advertisers
This assertion is not correct. Yet. The reality is that as an advertsing medium, the internet is far inferior. There are reasons for this. For lead gen and seach, online is good. Unless you can make the case otherwise, though, this does not hold in other areas. You can't just assert that they are similar.
That's why I said "should be". Individual targeting should be really powerful--just look at google. But Hulu so far hasn't been able to do a good job of individual targeting.
I'm sure there are reasons why; it'd be interesting to hear what they are rather than just "there are reasons".
Its not really clear though, based on what you are writing, if you are saying the should be the same or they should be worth the same.
TV is very powerful for ads that require or leverage immersive, experiential pre-visualization. These are expensive to produce, so not fit for micro-targeting. they are also large data-payloads, so not fit for distrubution in N-bundles.[1]
At some stage, in the Steve Jobs world (no pun intended), the mediums will converge, technologically. And then things will change, a bit. But the above forces are somewhat fundamental, and just need to be considered (at least).
Its generally not the TV people, they are more caught up on exclusivity around content. Its the advertisers, who sense the ability to communicate online is (has not been) up to the standards they need for the black arts in which they are well versed.
Other people can probably add more to this, but this is at least a roadmap for analysis.
______
[1] Questions also remain outstanding on the environment of online: is it too distracting/evasive, will it just be skipped, etc. But this is a grey area, moreso than the others. For example, humour or design applied to add interest might be a strategy (if it were economical to run online-spefic ads, which is generally is not yet for TV-replays). The other evidence (as noted in another comment) is the reduced payload. Hulu would be putting more on if they could, but we can infer they don't think its a good idea. Most likely, the internet consumer is not willing to tolerate the additional adds before leaving or being so distracted, the existing ones lose their value. Etc.
Hulu does target users already based on a lot of demographic information they have. This can be based on info found in your user profile (gender, age, zip code, etc). Additionally Hulu builds profiles based on past viewing history and is able to fit a viewer to a demographic with remarkable accuracy.
Ads on Hulu are and have been more effective for advertisers than its television counterpart (http://socialtimes.com/hulu-ads-are-twice-as-effective-as-te...). The issue for Hulu is that because there are less of them in every stream there is less to go around. This especially bothers the content providers.
It's astonishing how difficult it is for content companies to get this right. Torrent sites have had it down for more than half a decade. I started using private torrent sites to obtain TV shows more than 6 years ago, and even though very little has changed in a substantial way since then (excepting the rise of Project Gazelle), the process is great. You can download any show, any time you want after the show has been released (+15 to 20 minutes), with no restrictions. I find it ridiculous that this is still an issue in 2012.
You don't get paid for the value you produce, you get paid for the value you can withhold. The DRM capabilities of Flash, Silverlight, iOS, etc. are the only reason that Hulu and Netflix stay in business; torrents are fantastic, but in a free-info model, there's nothing to withhold and no way to get paid. Embedded commercials would get immediately edited out, and product placement only goes so far.
I don't like the situation either, but without a new business model (or a new economic system), we're stuck with what we have. (Most) video content is insanely expensive to produce, and physical disc sales continue to decline.
> The DRM capabilities of Flash, Silverlight, iOS, etc. are the only reason that Hulu and Netflix stay in business; torrents are fantastic, but in a free-info model, there's nothing to withhold and no way to get paid. Embedded commercials would get immediately edited out, and product placement only goes so far.
How is this any different from the situation right now with DVDs and Blu-rays? You can copy videos very easily. And what about torrents? If people wanted to download and copy files, they could do that with torrents. But instead, the people who actually bother to pay for the movies and TV shows are punished.
And this same argument could be applied to music stores, but Amazon and iTunes operate without DRM, and there are no issues there. A lot of pro-DRM people said the iTunes store would collapse without DRM, but things seem to be working just fine for them. We've been through this exact same argument half a decade ago with music. The only reason it's being repeated is being the old farts in charge of the media companies are too shortsighted to see what will benefit their companies in the long term.
I didn't mean to imply that DRM-free video stores can't work; I meant that (a) torrents themselves are nigh-impossible to monetize, and (b) suits at Big Content will never feel comfortable with opening up their precious data, even though you and I know that the raw data exists already.
Though millions are sometimes spent to market music, that's peanuts compared to the costs of producing movies and television, and that money won't get spent without some confidence that it can be recouped. It's one thing for Louis CK to gamble $0.2M on a DRM-free standup special, and another for Disney to gamble $220M on a DRM-free Avengers.
> How is this any different from the situation right now with DVDs and Blu-rays? You can copy videos very easily.
Nerds can, but DVD ripping is still much less friendly to regular people compared to MP3 swapping, and requires much more work to play back compared to iPods and CD burning. If the industry ever got behind open standards, eventually many more people would pirate movies instead of just college kids. Borrowing a DVD from a friend would be no different than taking it permanently, resulting in fewer total sales.
Don't get me wrong: DRM is a plague. Hell, I'd even support a tax that made all content part of a universal digital library, with funds distributed proportionally to usage. But without somehow creating a new economic system for digital content, every "rational actor" is going to do whatever they can to maintain maximum leverage. The only reason the RIAA caved was that the damage was already done, and they had lost most of their leverage already. (Also, it was something of a ploy to give Amazon an advantage over iTunes, which was enjoying a brief hegemony over paid music downloads; user freedom was a happy side effect.)
In one word, the digital content publishers and resellers need to tryst their consumers. Though you protect the digital content with DRM, smart consumers can use a special tool (how to remove DRM from iTunes for free http://dig4u.org/rip-drm/remove-drm-from-itunes-for-free.htm... )to 'hack' them.
What the torrent sites are getting right isn't the price, it's the UX. I actually pay $20/month for a seedbox, but that's worth it to me because the UX with torrents is far superior to Netflix, Hulu, or anything else out there.
But they have unlimited freedom on the UX because they don't have to worry about protecting their content. It's a much easier environment to work with.
$200 is arbitrary and i'm not even sure it matters. would $100 or $50 be a different argument? that said, your analogy does not consider: 1. netflix has an insufficient library
2. as you admit, torrents are available essentially the same time they air.
seems they are completely aware they can get $200/m of paid tv content entirely free as well. which would actually suggest, despite your sarcasm, that no, it's not the reason.
the issue is easy , torrents are not financing content creation. In the end someone has to pay in order for tv-shows to be produced and producers have rights. You cant just decide to own something if you did not pay for it one way or another , or it is called stealing. And because it is easy to do so doesnt mean it is legal or it is moral. Nothing is free down this world. But torrent sites are making money with the traffic they generate with the content they illegaly distribute. They create revenue by destroying a lot of value.
Since the article mentions the site redesign, I think this new design is not going to work out for them. The information density is too low, resulting in the site feeling empty and making it less interesting to browse around. I think they'll lose a lot of casual viewers because of this. My assessment may be wrong and I am curious to see how this plays out.
Just to offer the opposite opinion, as a frequent user of Hulu I love the new redesign. To me it has less of the useless stuff and more of the useful stuff immediately available.
The new front page has helped me discover many new shows that I wouldn't have found any other way
Additionally the new design feels much faster and more responsive. If given a choice I would not go back to the old design.
I am routinely baffled at some of the choices content-holders make regarding not just Hulu, but on-demand availability of their content.
I remember when I first began watching "Shameless" on Showtime. I had missed pretty much the entire season before somebody recommended it to me. I found it on Verizon's "On-Demand" and watched a couple episodes, loved it, then came back the next day to find out that all the episodes had been pulled off of On Demand for a few months.
I can only assume it was pulled to keep from scavenging DVD sales or something like that, but at that time, I hadn't watched enough to build up a love for the show that would have persuaded me to buy a DVD.
I work from home, so I will often put TV shows on that I can mindlessly watch while I'm working. This generally excludes shows that require lots of attention, but most prime-time shows are pretty digestible with only a modicum of attention required.
All too often, despite having all channels on FIOS, Netflix, Hulu Plus et al, I find that I can't watch the first season of a new show that looked interesting.
You should _always_ give away at least the first few episodes so that I can get hooked. I don't have a problem with releasing the episodes the day after, or even a week late... but don't deny me the ability to fall in love with your show by only showing me the past few episodes, unless your show is only into its fifth episode of the first season.
I share your amazement but at Teller (of Penn & Teller) said in one of his interviews, "People only believe what they are prepared to believe." Over the years I've discovered that while this makes a lot of magic tricks possible, it also profoundly affects how people react to environmental changes.
Whether its executives at a large content conglomerate debating the economics of content or parents at a school debating the validity of the scientific method, if someone is given a choice of what to believe, and one choice would violate some other deeply held belief, they always choose to believe the explanation that doesn't challenge the status quo. Regardless of how ridiculous it might seem to a neutral third party observer.
This mis-feature in the human brain seems to cause a lot of trouble.
The deeply held belief that I have heard expressed by many different big content holders is that the 'true value' of a work can only realized by keeping absolute control over the use of that work. Thus they work to maintain absolute control by technology, by regulation, and by the force of law.
We consumers might not like what they do, but I'm sure they know how to maximize profits. Why give shows away for free or a pittance, when people who care are willing to pay dollars per episode? I'm sure they're happy to give away quite a few users to whom an episode is worth a dime or a quarter in online ads, in exchange for getting to keep motivated viewers willing to buy the DVDs at $3 an episode.
I understand and appreciate their right to do whatever they want to with it, but with perhaps very few exceptions, I can't imagine how you can justify not giving away the first few episodes as a loss-leader for people to actually get hooked on something.
If I can't see the first episode, the chances of me 'jumping-on' are effectively nil, and I'm certainly not going to pay for something I don't love and haven't seen.
Perhaps I'm not the average user, and I'm perfectly willing to accept that. And again, it's not like I don't respect their rights to do whatever the hell they want, it just doesn't make sense to me. Ultimately, there's not a TV show or movie that I can't live without seeing, but not ever letting me see your show isn't a way to maximize profits, at least from me.
I've seen showtime do the same thing with Spartacus and Dexter. They've both been on and off netflix multiple times, yet showtime did provide the season premiere for both of these series free of charge on their site. This practice definitely makes good sense, and I'm sure it will start catching on.
I worked for a streaming media startup that partnered with old-line media parents. Parents killing their new-media spawn is by now well-established practice, and nobody should be surprised about the struggles of Hulu.
The media giants depend on their existing distribution partners - cable companies, DVD sales and theatrical. They aren't going to put these channels at risk. Streaming media won't be first-class until a new streaming-centric content power emerges, or until the strength of cable is broken.
Eventually the transition will happen. But when. In our lifetime? Not sure.
How streaming should work in 2012: a provider-agnostic protocol allows any video producer to place content online, either for streaming or download. There are no codec wars or patent issues. Digital video "warehouses" collect all these sources of video, providing bandwidth and an open API for purchasing streaming and/or download rights to a video, with a simple algorithmic pricing structure. Frontend websites and applications then compete for user attention, mixing and matching video from any source they please, with the only requirement that they pay the streaming rate to the video aggregator. Any video, any time, with any UI.
Instead we have ever-increasing ad durations, limited episode selection, proprietary players with terrible video quality (e.g. some of them use nearest neighbor scaling in fullscreen, there's no vsync so there's massive tearing and jitter, the latest versions of Flash for Linux and YouTube swap the red and blue color channels, etc.). Television as a medium is broken, IMO: advertisements are timed to start right at the point your mind starts to get absorbed into a show, causing frustration and a desire to change channels or close the tab.
I'm completely on board with everything you're saying, but algorithmic pricing is non-trivial; were it to be achieved, it would fundamentally rewrite the rules of economics as we know it.
Prices aren't decided by value or fairness, but by negotiating leverage. If Mad Men knows they're in high demand, they ask a high price or walk; if Netflix knows that a horror B-movie is in low demand, they offer a low price or walk.
Getting content owners to cede their negotiating power in either case to a universal formula will be nigh-impossible without fundamentally rewriting IP law (which for the record, I am enthusiastically in favor of).
It is my opinion that in an ideal world (ideal as in, most pleasant for humans to inhabit), pricing of video would be constant, and high demand would be its own reward through higher sales volume.
They need to make Hulu Plus more appealing. I am currently subscribed to it but I have no reason to resubscribe. I can't find any of the shows or movies I want to watch on it that aren't already on Netflix.
If I'm paying a monthly fee for something I don't want to have to sit through an enormous amount of advertising. This is doubly true online when it's trivial to get it a higher quality version without advertising for free. I'm happy to pay the monthly fee for the convenience of advertisement free streaming (which is why I love netflix and spotify), but it's insulting to pay to watch advertising (and even more so when you also have a cable subscription).
All hulu plus does is what cable tv should have started doing years ago which is let you watch all shows on demand, it fixes nothing else and charges too much for that obvious privilege. The way the introduced ads also bothered me and reminded me of how the cable networks brought them in (initially cable tv had no advertising which is one of the reasons you paid for it).
So how much could Netflix pull in with ads? They streamed a billion hours in June, so if it was one ad per half-hour (on average), at 30$ CPM does that imply 60M$\month? That's a serious amount of money.
I used to be a Hulu+ subscriber until they introduced the "brain-spray awesome" experience last month. Now I am not a subscriber and since there is no free Hulu to watch on TV - not even a customer.
They took away the ability to add an entire show to queue and the notifications of the new episodes in the shows in your queue among many other things. I am not sure who thought the removal of these features is somehow making the service better but I would be really surprised if it were its parent companies.
Seeing how the company spends money to cripple whatever UX it had before and lose customers I imagine Hulu has much bigger problems than the influence of its parent companies.
They didn't take that away. You just click the favorite button on the show's page. Updates to that show are added to your queue. All that changed is the name (Favorite instead of Add to Queue).
"Updates to that show are added to your queue" != "all show episodes are added to your queue". There used to be a choice: "subscribe to new episodes" and "subscribe to all episodes" now there is not and it's "subscribe to new episodes" only.
Media companies suck. CBS now delays start times by 2 minutes to break DVRs. And certain shows (ie person of interest) don't exist legally on the Internet.
Online content can target ads individually! I've filled out the survey on Hulu, they know that I'm a guy, my age, etc. They probably have pretty good guesses about my income and my interests. The full set of shows that I watch paints a pretty detailed picture of who I am and what I like. In an ideal world, they could use that information to show me very precisely targeted ads.
That famous quote, "Half the money I spend on advertising is wasted; the trouble is I don't know which half." is probably mostly right, except I'd bet that it's a lot more than half that gets wasted. And Hulu should have the ability to fix that, by individually targeting ads! But they're still showing me, a fairly nerdy guy, lots of Febreze ads and Glade sense & spray ads and even the occasional tampon ad or whatever.
Google is proof that precisely targeted ads are really, really valuable. And I think targeting ads well even makes them less annoying; if you're showing me something that's actually relevant to me, I feel less like my time is being wasted. But Hulu and its advertisers still haven't figured out how to match up ads and users.
It's sad. But whoever actually solves this problem will make oodles of money.