Hulu could be stepping back to the future as it considers abandoning its business model to function more like a 20th century cable company. Image: gbaku/Flickr

It’s possible to have too much of a good thing, according to the owners of Hulu. Hulu is worried that a generation of revenue sources is being trained to expect access to video content on the Internet for free. Despite more than doubling Hulu advertising revenue in 2010, it may abandon its original business model to become a web-based cable company.

Hulu competes with its partners

Hulu was launched in 2008 and has since become one of the most successful Internet video content providers. Media heavyweights NBC Universal, Rupert Murdoch’s News Corp. and Walt Disney Co., which owns ABC, joined forces with Hulu to offer a legal alternative to pirated YouTube videos. But as more viewers shift from cable to the web for video entertainment, its owners fear Hulu’s success will erode revenue from their traditional media properties. Hulu executives are also envious of Netflix, which had $2.16 billion in 2010 revenues and announced Jan. 25 it has 20 million subscribers. Hulu, which sells advertising around its programming, netted a modest $260 million.

Internal dissent threatens Hulu IPO

Hulu content providers started complaining that its streaming content cut into cable advertising revenues as early as 2008. It’s being reported that News Corp. and Disney are considering pulling content from Hulu and selling it to companies that compete with Hulu in the Internet TV niche, including Apple, Microsoft and Netflix. That possibility strikes fear in the heart of Hulu executives, who hungrily eye a Hulu IPO in the future that could net up to $2 billion. To hit that kind of jackpot going public, Hulu needs to secure access to programming for the long term.

It was fun while it lasted

Hulu’s licenses to News Corp. and Disney content expire this summer. To complicate matters, NBC Universal must give up its stake in Hulu because of anti-trust rules involved with Comcast’s acquisition of the company. When that happened, NBC Universal promptly betrayed Hulu and gave recent episodes of “Saturday Night Live” to Netflix. Amid the tumult, Hulu is exploring the possibility of becoming a web-based Comcast, with inflated charges and pay per view bundled with channels subscribers will never watch. As major corporations swallow up the Internet, the new era of web-based TV pioneered by Hulu could be short-lived.


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