TechMediaTalk

Hulu and Boxee - Brass Tacks of Online Video Business

Posted on | February 23, 2009

Image representing hulu as depicted in CrunchBase
Image via CrunchBase

Hulu pulled access of its content from Boxee last week.  The reaction and general sentiment expressed as a result of this action across the wires is not surprising.  However, admonishing the media companies as being short sighted, even comparing them to RIAA – and the plight that befell the music labels as a result of fighting the Internet – is premature.  

boxeeBoxee delivered 100k streams per week, and while clearly there is a community here that is very disappointed, this is a small community.  The only problem with Boxee is that it is too close for comfort to where many other big players in the media industry want to be.  Whether the pressure to pull the plug came from the programmers or their carriage partners, this action should be taken as a sign that there are high stakes at play in the world of digital media.     

While consumers are thrilled with the apparent open access of primetime programs from the likes of sites like Hulu and ABC.com, these are businesses being incubated by broadcasters.  This is not media companies giving in to the forces of the Internet, but rather them parleying the success of their content to an imminent new medium of distribution.   The video business is based on a complex structure of syndication and windowing, and online distribution is a part of growing this franchise, not giving it away.  

Let’s look at some facts first:  Hulu’s investment of $100M is among the largest of any online video company, if not the largest.  While it can be argued that this is not a huge amount for NBC and Fox, how many digital media companies have been funded by VCs to this level? Comcast’s acquisition of thePlatform was estimated to be at a similar figure (though some reported it as significantly higher).  Think of these as a high level of commitment to maintaining a business in an environment of disruptive technologies.  

Secondly, while all the major broadcasters have online video initiatives, cable networks (which are significantly more numerous than broadcasters) have been conspicuously absent from such Internet initiatives for most part.  This should be no surprise when one considers ‘the hand that feeds them’.  At the same time, cable operators have announced initiatives to bring such cable network programming online – on their own terms.

While the impressive growth numbers of online video over the past few years may suggest that this market is well on its way, we are only seeing the beginnings of a new industry.  The wheels are in motion, and while everyone is invited to the party, not everyone is welcome to stay.  The fact that we can connect our PCs and game consoles to our TVs and watch Internet video, doesn’t change the fact that the number of people likely to do this are very small early adopters, and by all means are of interest but not critical to the end goal of incumbents in the television business.  As soon as something starts looking, feeling and smelling like television, that becomes a different matter.  That’s where Boxee was a victim of its own success. 

As many are predicting, Boxee will ultimately return, and I am confident it will.  At the same time, there will be other such road bumps where the actions of content owners, programmers or distributors will seem discordant with their intentions.  Or are they?

What do you think?  Start a discussion below.

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Category: Aggregators, Broadcasters, Cable, Strategy

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