Hulu Drops The Hammer

Dave Zatz —  February 18, 2009 — 33 Comments

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I sort of figured this day would come… Based on my perception of the licensing/royalty complexities and content providers fear that a current web video catalog piped to the television competes with live broadcasts. Hulu has shown their true colors – spawned of big media and beholden to big media. And Boxee has become a victim of their amazing success:

two weeks ago Hulu called and told us their content partners were asking them to remove Hulu from boxee. we tried (many times) to plead the case for keeping Hulu on boxee, but on Friday of this week, in good faith, we will be removing it

We don’t yet know what this might mean for others, like PlayOn, D-Link DivX Connected, and SageTV HD Theater, that also deliver Hulu content to the boob tube. Even if these folks don’t hear directly from Hulu, they’ve got to be rethinking the development resources they dedicate to Hulu support going forward. Related, I don’t believe this move foreshadows Hulu’s own set-top box. It’s just more of the same old school, short-sighted thinking that crippled the record labels. Good luck with that.

33 responses to Hulu Drops The Hammer

  1. I’m so pissed.

    Like beyond belief. It makes me want to pirate as many NBC / FOX eps as fast as possible. There’s no diff between browser and boxee.

    GRR.

  2. “The system will eat itself.” – Fahrenheit 451

  3. Shrug. Eventually they’ll allow it or hulu will lose all value. Boxee still works with pirated video, after all. Hollywood fatcats don’t understand the industry, etc, etc.

  4. I just checked and it’s still available on DivX Connected, but we’ll see how long it takes until DivX caves and takes the plugin down.

    I can’t say that I’m surprised. The media companies have made their riches by taking advantage of the public bandwidth. Now that they are starting to become threatened by innovators, they’ve formed a cartel to try and force consumers to watch on their terms. Sorry Hulu it doesn’t work that way anymore. You lost control long ago. All that your Hollywood overlords will accomplish is to convert more consumers into pirates.

  5. Convert us into pirates? No, my friend, you have it exactly backwards.

    We were ALL pirates, and hulu converted us into watching their ads. Now we’re just reverting to our natural state.

  6. Hulu also dumped TV.com, a CBS property. Not Comcast’s Fancast though.

  7. It’s currently still on DivX Connected and PlayOn. It’s possible SageTV might still be okay as well, but we’ll have to wait this one out to see. Either way, this was a monumentally stupid move by Boxee and their owners.

  8. A stupid move by hulu and their owners, you mean.

  9. Mari, Hulu seems to be keeping business deals with agnostic web partners like Fancast and Sling.com. It’s potential competitors (CBS-owned TV.com) and television output that’s been kneecapped far as I can tell.

    As an aside, I actually think there may be some inside the Hulu organization who think progressively. Blogging this and then turning off comment moderation might mean they want NBC, Fox, whomever to see the passionate response…

  10. How does this make sense for a company who wants people to see their commercials?? This is like McDondald’s only selling food inside at the counter… Heck with the drive through… I’m convinced you have to have a VERY LOW IQ to run a television network!

  11. “How does this make sense for a company who wants people to see their commercials?? This is like McDondald’s only selling food inside at the counter… Heck with the drive through… I’m convinced you have to have a VERY LOW IQ to run a television network!”

    Yeah no kidding the ads are still there if I watch on the computer or the tv so what difference does it make to them. They still control everything if they take a video off hulu I still can’t watch it if I am using boxee or playon.

  12. A key question on how this affects other extenders/implementations is whether Hulu is trying to cut off access through their API. I’ve heard some grumbling in that direction and am trying to find out if there’s more to it.

  13. This is unbelievably stupid.

    Why on earth would you want to force people to use Usenet and/or Torrents; because that is what this decision does.

    Makes you wonder if anyone in the Movie/TV business has any idea at all about how this technology works let alone how it is used.

    This is the dumbest thing I have read about in ages.

  14. How can we expect broadcasters to change their minds when comments advocate and/or threaten the use of pirated sources for the content? I’m not agreeing with the decision to pull Hulu from Boxee – in fact, Boxee is one of the most exciting apps I’ve seen in a long time, and actually the first one that got me to hack my Apple TV – I’m just arguing that telling the broadcasters that you’ll never watch their ads, subscribe to cable, pay for satellite, or in any way do anything that generates revenue for them really makes your point of view useless to them.

    Out of curiosity – how many of you would pay $5 or $10 a month knowing that Boxee made a buck or two and Hulu received the rest as a royalty payment?

    I’ve never understood the free aspect of these services… we pretty much have to pay to watch TV these days with the exception of the very, very few of us who get OTA channels and eschew satellite and cable completely. I’d pay a HELLUVA lot more than $5 or $10 a month if I could truly replace my DirecTV with on-demand first run programming that was comparable. Even if it was only for a couple of weeks and then I lost access to it until it was “re-run” and even if I still had to watch ads.

    I suspect I’d represent a more valuable comment to the broadcasters, since I represent $$$ as compared to representing the advocacy of what is legally considered theft.

    I pay $90 a month for DirecTV. I’d pay probably up to $40 a month for comparable service but lo-def and up to $150 a month if I could get comparable service in hi-def (that’s right, I’d pay more).

    To me, the Holy Grail is iTunes HD programming (ease of browsing, pretty much guaranteed fast downloads, some customer service available, Apple TV compatibility) – but sans the $2.99 an episode. Charge me a monthly fee and throw in ads if you have to. I would expect less ads than on satellite since I’m now giving up my DVRs ability to let me skip commercials plus generating more revenue directly to the networks thanks to bypassing Comcast, DirecTV and the likes.

  15. I would pay for the content without commercials, sure. I would never consider paying for ads, in any medium.

  16. The real reason this has happened is that Boxee took too much license in “tranforming” Hulu content. What I mean by this is that, unlike other browser/portals like ZeeVee’s Zinc, Boxee sort of steals the eyeball from Hulu versus sending the viewer onto Hulu to be watched within their nav/guide/player. It does stink because the Boxee interface is beautiful, but if you think about it, the real benefit of the Boxee’s, Zinc’s, and Sling.com’s of the world is that they help you find and select the content you want (and tell us when content we like is new and available). Intsead of having to open 20 browser from Hulu, ABC.com. CBS.com, ESPN.com. Metacafe.com, etc. you can just open one and find what you want. You can still do this with Zinc (and yes I am biased since some of you will recognize me as a guy who used to work for ZeeVee– but I speak the truth).

    So this raises the value of “screen-scrapers” like SlingCatcher and ZvBox which aren’t limited by Hulu’s threats since they can show everything on your PC screen.

    The ABC.com’s of the world are here to stay. They discovered a while ago they can make as much money if not more from online viewers because:

    1) They don’t have to share ad revenues with the Comcast’s of the world.
    2) Online veiwers watch every show of episodic content, including online commercials, versus the once or month or so for regular broadcast viewers due to the on-demand aspect of Internet TV versus trying to fit sitting down at 9 PM on Thursday into our busy schedules.
    3) “Expanding the demographic pie”: Online shows develop whole new audiences. While seniors might only watch Matlock on regular TV, online a new fan base of 20-somethings now watch that corny show.

  17. Scott, I don’t think anyone needs to threaten the studios with BitTorrent or Usenet. It’s safe to say people have been and continue to acquire content via those means. So wouldn’t the studios prefer to figure out ways to simplify the digital experience as a means of monetizing the video already out of their control.

    I’m more than willing to pay. I currently pay by watching ads (on Hulu or television, as I’ve done) or dedicated subscription (as I currently do with Netflix streaming and Comcast cable). However, if Hulu wants to charge real money in lieu of ads I’ll expect higher quality video and will want to watch on the devices of my choosing. Bring it on! (Assuming our broadband providers, who are often television service providers, don’t cap our data usage in ways that dissuade us from alternative Internet-delivered sources…)

    However, here’s an example of money Hulu is leaving on the table – I caught an episode of Alf (nostalgia) via Hulu on TV. It’s not something I’d grab off BitTorrent or a DVD I’d buy, yet I gave them an opportunity to sell advertising on content that’s decades old. Why would they give that up?

    BMahony, There’s more to it than forcing people onto Hulu.com. I do agree they probably want to control and vet the experience, but it doesn’t have to be Hulu’s site. That content is currently syndicated back to some of the partner providers sites, aggregated on Sling.com and Comcast’s Fancast, etc. Those are business relationships, not screenscraping.

    Again, it’s my belief that providing a means of piping the video onto a television is the crux of the issue (combined with Boxee’s popularity/exposure). And it could be simply an antiquated licensing/royalties system. You’ve got tons of stakeholders and they all want a piece of the pie. Additionally, the affiliate networks probably fear we’ll stop watching the local NBC to catch shows on Internet-connected STBs instead. If/when Hulu comes to the television set, I’m willing it bet it’ll only be back catalog titles.

    Beyond the viewers, the big loser in all of this is Boxee. Hulu was probably a huge draw. Probably more so than home media playback and social viewing features. And who knows if ABC or some of the others will follow suit.

  18. The iTunes music store proved that people will use a legal service if it gives them the content they want, when and where they want. If you cutoff the flexibility, then piracy will grow again.

  19. Dave, I think you hit the nail on the head. And you correctly point out that there’s no shame in paying for commercial-laden programming. That’s what the bulk of us who subscribe to cable or satellite television currently do. Whether these services transform into a replacement or an augmentation of those services time will tell. Don’t let too many people know I’m all for it – they will revoke my Slashdot user id for sure!

    For sure the affiliates are terrified of Internet distribution of television content. They are for sure more opposed to it than cable channel operators. And that makes the broadcast networks inherently scared, because affiliates bring in the bulk of their revenue. And that directly affects carriage of many cable channels, since the larger ones are often owned by broadcast networks. ESPN is part of the ABC family, for example.

    This is a temporary setback, most likely, and we can all look back to the early days of satellite TV when the mini dish providers were new startups (DirecTv, Primestar, Dish Network). I was still in New York at that time which will provide the irony for the story I’m about to tell:

    Back then you had to write your local affiliate and ask for a waiver to receive that network via your satellite. In New York, for example, that meant I had to obtain a waiver from WNBC-4 or I could not watch NBC via satellite. The exception was viewers in remote areas who were more than “X” miles from the broadcast antennas – I believe it was 50 miles but that number could be wrong. I was able to get the so-called Superstations via satellite, which at the time included WPIX-11 and WWOR-9, which conveniently were my local stations, plus WGN out of Chicago. Out of the remaining local networks, I received waivers from three of the four (ABC, NBC, CBS) – only FOX turned me down. With those letters, I was able to receive the local stations. I later used the wording to do something nefarious and ended up receiving FOX as well. The ironic part? I was living in Brooklyn. FOX turned me down which prevented me from getting the East coast FOX feed. In other words – I’d still see THEIR programming and THEIR local advertising. Perhaps they were concerned that nobody was tracking satellite viewership at the time (Nielson) and therefore it was a “waste”.

    One of the networks actually granted me a full waiver, which allowed me to get both the East and West feeds (Los Angeles stations).

    How did the satellite companies emerge from this consumer nightmare? More satellites = more bandwidth. Plus they layered on better compression (MPEG-4 replaced MPEG-2). Plus, quite frankly, they seem to have increased the compression which some say has reduced the quality of the channels. But they now tend to carry every local in every major and minor market, and you can get programming through a combination of FCC rule changes and your provider carrying your local stations.

    This could very well happen on the Internet. Perhaps by Hulu, perhaps by an Apple, perhaps by some guy who reads my post and does a startup (remember me – I’d love a set top box or two for free if that’s you :).

    Perhaps if Hulu used IP geolocation to determine your area and had an agreement with the local NBC affiliate and streamed their ads in full – well, perhaps they’d consent. You’d see more ads, for sure, but you might get that higher quality video out of it too.

    The problem is, it’s not quite as simple as “hey – let me show your ads”. Your cable/satellite company (as the case may be) actually PAYS to carry cable channels, which is why sometimes big channels disappear temporarily due to contract negotiation failures. For example, find any number of millions of people who were very disgruntled Yankee fans in the early days of the YES network when they learned they were in the Cablevision region, and couldn’t watch the games!

    So – if a Hulu like experience shows up on your TV, expect a charge to go with it.

    Why hasn’t any of this happened yet? Quite frankly, the number of people viewing NBC programming on their TVs is very small. Take away Boxee and it’s even smaller. It’s not yet worth the effort to negotiate pricing, and advertising carriage, etc. But Boxee did get big enough to scare the bejeezus out of somebody!

    PS: When do we find out what GPS is in your car? You aren’t still dashing are you?

  20. Is this the place where people go to complain about Pushing Daisies being canceled? If it is then count me in.

  21. I think for most rational people, it isn’t the notion of having to pay something for content that is irksome. It is the fact that in 2009, when we have all of these highly connected, smart devices in our home theaters, the big studios are unable to make the content available in a palatable form. Then, as soon as they start down that path and people start to enjoy it it, rather than begin to find other ways to make it work for their customers, they revert to true form and “cut it off” as a solution.

    Piracy isn’t a threat, it is a fact. I’m not defending it…it already exists. There are many disadvantages to pirating video content. However, those pirating content are not affected by this, get the content in the form they want, when they want it, and can watch it wherever they please. Hulu is MUCH easier than pirating video. Monetizing that (through micro payments or advertisements) should not be a difficult task. To have not imagined that people would want to watch “TV Shows” on their “TVs” seems moronic.

  22. It’s not about money from my perspective.

    I pay for my Usenet feed, it’s not free.

    I’d love to pay for a TV version of Rhapsody with all TV shows available for streaming in HD.

    It’s all about convenience and availability.

    If you make content hard to get legally, then people will get it illegally.

    As for threatening the networks with Usenet and torrents; it’s not a threat as it already happens. The question is will the networks and movie studios try and offer something better than Usenet and torrents or will they just try and ignore the problem.

  23. I keep seeing people (in this blog and others) talk about Usenet and Torrents, and saying “it’s not a threat, it’s reality”. I think the issue is, everytime that comment is seen by Hulu or a broadcaster in a comment… the rest of the message disappears, because nobody in those groups want to cater to “piraters or those who threaten to do so”. It’s killing the message.

    If you or someone you love :) pirates… tell them to keep quiet about that, and just talk about how you’d love to see their content on X platform and would even consider paying up to $Y to get it.

    I see the comments above, and some fair percentage all reference torrents, Usenet and the like and I see their point. I’d ignore us too – we don’t look like the demographic they want.

  24. >> we don’t look like the demographic they want <<

    …you mean people who love watching TV? Yeah it seems to make sense to ignore them.

  25. Just like Dave, I had a feeling this was coming, especially since Hulu hasn’t pushed out official player/widget for set-top boxes/TVs/consoles (unlike Netflix, Amazon, YouTube, etc.). I also agree with posters that local affiliates are probably some of the people who complained about this.

    But I think the question that is NOT being asked is why would Boxee go along with this since there was never an official affiliation between them and Hulu in the first place? If I had to guess, Boxee’s blog post and Twitter messages indicate that they went along to show content providers how passionate their target demographic is and how valuable Boxee is to content providers’ cause.

    Bottom line: if Boxee’s forthcoming talks with content providers don’t produce results, I fully expect Boxee to put Hulu support back in.

  26. Jim… way to take an entire post out of context by quoting one sentence. No, the demographic I referred to isn’t “people who love watching TV”. It was “people who complain about the lack of streaming Internet TV on their TV screens by mentioning how we’ll all just go back to pirating”.

    By the way, broadcasters don’t look for a demographic called “people who love TV”. They look for certain demographics based on your age and buying power, and in many cases, your sex.

    It’s a completely financially motivated system. Which is why talk of torrents is offputting to them.

  27. You said “don’t look like the demographic they want “.

    My point is that they are exactly the demographic they want. It’s just that they don’t realize it. First and foremost demographics don’t matter at all if you are paying for the content, they only matter if you are paying for the content with advertisements.

    Maybe I need to make the point differently.

    (1) They love TV.
    (2) They own high tech gear. It’s not people like my mom buying hulu boxes.
    (3) They don’t minding spending money.

    To use me as an example. I have the fastest internet connection available (FIOS). I spend all kinds of money on tech gear and video/music products (like Rhapsody, Sonos etc). I spend a fortune on music and video products.

    I have all kinds of hardware that can stream video to my TV (Sling, TiVo, NMT), but content providers don’t want to sell it to me or at least not in HD.

    What it boils down to, is these guys cannot figure out how to sell their product to me.

    Just like the music industry, clinging to CDs until it was too late, the video and TV industry is making the same bad choices.

  28. content owners see two pipelines here

    one is broadcast with affiliate partners and so forth

    two is internet which is direct to subscribers.

    when internet shows up on the TV or the broadcast shows up on the internet it gives them headaches becasue everything gets complicated to them.

    Why in the world it seems complicated to get ads in front of more people is beyond me, that is after all what is actually being sold and when money starts to show.

    Sure Hulu on the TV screen scares affiliates because they did not place it there. They should be scared because the only thing broadcast does is aggregate content. The ycan try and hold off aggregators like Boxee but if they insist on internet delivery the aggregators will happen as sure as piracy happens.

    So FOX – adjust the cahones and realize you are either in for all or nothing and let me pay some bucks for a box that will put content on my TV screen and watch your ads. So what if other content is on the aggregator screen – that is the game you already know of having the content people will watch and for me frankly you already rock at that game and I would be happily streaming your ads to my TV for some time to come.

  29. Jim, I hear you, I just don’t think the demographic you define is actually the one they most treasure. Right now, the major revenue source for affiliates and cable stations are pretty much:

    1) Commercial advertisers (who absolutely love YOU, with the caveat that they don’t want to reach you in a way that threatens their ability to show you said advertising – which is why they were resistant to DVRs at first). Specifically on the local networks these commercials represent SOME (but not all) of the commercials you see.

    2) Cable and satellite companies who pay them for carriage of their stations. Note that Boxee doesn’t pay them for carriage of their programming. If you have cable or satellite and get Comedy Central it’s because your provider pays them for the content, and then charges you a fee that between your monthly payments and payments from advertisers exceeds their expenses.

    The networks themselves (NBC, ABC, CBS, FOX – but not their local affiliates) have the other half of the ads, plus earn a fee from the actual affiliates, and perhaps in some cases where they produce their own shows get a fee from things like product placements, etc.

    You, as Joe Boxee User don’t really fit into any of those categories. Yes, you see a couple of commercials… but not as many as they broadcast in real life. You watch them, but they don’t really know your demographics the way they assume them when they aggregate results from Nielson and the like. Those commercials we’ve all been assuming net less money then the “real life TV ones” do.

    Hulu is a broadcaster allowed experiment into DRM-laden streaming of media to computers. I can understand their hesitance to let it take over TV screens for millions – because it would represent a MAJOR loss in money.

    There’s been less resistance to TV via iTunes and Amazon. Why? Because at $0.99 to $2.99 and with DRM controlling distribution to other people they make MORE off of you, since I doubt your share of the TV ads you watch in either medium (TV or Hulu) are anywhere near the payments Amazon and Apple make to NBC when you pay a couple of bucks for an episode of Heroes.

    Don’t get me wrong – I *WANT* things like this on my TV (and I did unlock my AppleTV to get Boxee on my TV although the quality was well shy of breathtaking to say the least) – but I understand why that particular model isn’t endearing Boxee to the content distributors and producers out there. I bet if Boxee charged you and paid them things might change. And I’d be ok with that.

  30. To follow on Scott’s post, it seems like a lot of the video ads lately have been PSAs and remnant stuff. I’m wondering if Hulu is having trouble landing meaningful ad campaigns for this medium (for whatever reason). If so, then it’s all just competition (in the studios’ minds) for local broadcasters, cable, and DVD sales.

  31. Scott,
    I see what you are saying. However, I think the purpose in pointing this out is to reflect the unique business environment that video content resides in. Computer software (including video games), music, video (tv and cinema), and books all reside in an interesting market where content providers not only want to control HOW you acquire their product, but also WHAT you do with it. People are willing to live with this (iTunes) if many of their desires are met. It pains me to watch this industry repeat past mistakes.

    I have done some reading on blackmarket economics. There are a lot of similarities between a blackmarket economy and the current state of digital media. The basic lesson is that, if there is a need, and it is strong enough, people will find a way to satisfy that need. They will find 100s of ways to justify why satisfying that need in “shady” ways is O.K.

    To me, the video market is where the music industry was in the early days of Napster. They have learned SOME lessons, episodes of shows are sort-of available through iTunes or Xbox Live. However, they continue to miss some very big lessons. The music industry was gutted when they failed to satisfy their customer’s desires and they trained a generation to be music pirates. Technology causes things to change. They can wish, hope, dream, pray, pay, litegate, or market for the good old days of old all they want. They aren’t coming back. TiVo is not going away so that I stop skipping their commercials.

    Most industries compete on what is technologically possible. IT IS technologically possible to provide what people want for video on demand. IT IS!!! The fact that, in 2009, content providers can’t figure out a way to make money on a product that has a marginal cost of ZERO is disgracful. Their shareholders should be angry. The point of the statement is that PIRATES can figure out how to make it available, for free, in the right formats, quickly and efficiently. Why can’t organizations with actual budgets, mangament, IT departments, and marketing people figure it out?????

  32. I really don’t understand what they have to gain by making this move. I guess it’s back to downloading torrents again for me.

  33. How to conect push 2 tv to the MacBook Pro ?

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