Monday, May 4, 2009

Video Insider: What Disney's Hulu Investment Means

What Disney's Hulu Investment Means

For all the talk about YouTube and Hulu in the trades and mainstream press, did you know that Hulu only recently became the third largest online video destination? According to comScore, Hulu's 380 million videos viewed eclipsed Yahoo's 335 million in March. At this point, it also puts Hulu within striking range of number two ranked Fox Interactive Media's 437 million. However, to put it in perspective, YouTube streamed 5.9 billion videos in March. Only when you look at these statistics do you get an appreciation for the size of YouTube.

However, size isn't everything when it comes to advertiser dollars. That is why the ad industry pays very close attention to all things Hulu, whose premium video platform is estimated to attract $120 million in ad revenue this year compared to YouTube's $200 million, despite the size difference.

The connection between premium video and advertiser dollars is also the reason why Disney Corp. made the strategic investment to purchase 30% of Hulu for an undisclosed sum. This gives Disney the ability to reach a far larger audience via Hulu than its current ABC video portal. It also gives Hulu access to an amazing library that includes current hits "Lost" and "Desperate Housewives. " Disney now has three board seats in the venture, alongside NBC Universal and News Corp.

The investment serves to not only underscore the importance of online video -- this is one of the few online deals Big Media has made in recent memory -- but it validates the Hulu model of aggregation. It will be interesting to see if Hulu's pace of growth can be maintained from a user perspective.

One of the benefits of the partnership should be additional promotion for Hulu. The recent TV spots featuring high profile actors like Alec Baldwin can be at least partially credited for its recent jump in the rankings.

The question that remains, then, with a growing Hulu threat, which of the following media powerhouses will be changing their strategy -- or doubling down and getting even more aggressive -- to compete?

CBS: Which has thus far resisted a Hulu partnership, focusing instead on its site.

Apple: Which has made it very clear that its long-term focus is on a paid, rather than ad-supported, business model.

YouTube: Revenue-share agreements have proven not to be enticing enough to Big Media. What can it offer in exchange for access to more premium content?

What do you think?

Eric Franchi was part of the team that launched Undertone Networks in 2002, and currently serves as senior vice president of business development. In this role, Eric oversees the company's business development initiatives, which include forging strategic relationships and developing new revenue generation programs, while working closely with the executive team on critical endeavors. He began his interactive career at

Video Insider for Monday, May 4, 2009:

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