Hulu Further Threatens iTunes Pay-As-You-Go Model

• The Disney-Hulu content-sharing arrangement announced yesterday is another big shake-up at the pay-as-you-go king, Apple (AAPL) and iTunes. The war over streaming premium content has been heating up publicly in the last 6 months, with YouTube, Sling Media and CBS (Tv.com) all trying to strike deals with studios and networks.  Hulu has been crowned the King of that battle and now they have their eyes set on a bigger competitor, the entire iTunes download model (for TV and movies of course). The more popular Hulu becomes and as consumers feel in control of their online streaming experience, the less compelling downloading the same content for a fee becomes. Business Week quotes Gartner (IT) analyst Michael McGuire who says “Over time, perhaps the direct-payment model goes away”.
• Hulu is now the No. 3 video site behind YouTube and News Corp.’s (NWS) Fox Interactive Media, owner of MySpace. With their current minimalist advertising policy (2-3 15 second commercials every 30 minute episode), they are on route to being the content model that dominates the industry as iTunes has dominated the music business. Apple’s download model has only pushed people further to illegally downloading their content. If you interview any college student at the moment, they will tell you they have mostly given up the hassle of illegally donwloading their TV content on Torrents  and gone straight to Hulu for the majority of viewing. More importantly, there is no TiVo for Hulu. At the moment, it is the only free viewing environment where users don’t have a choice but to view the ads. It’s surprising to me more advertisers have not tried to flock to this model before Hulu starts displaying more ads, someone figures out a Hulu DVR and advertisers are subject to the fast forwarding audience they have come to hate. Advertisers will figure out how great Hulu is soon, and world domination will follow suit.

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Tagged as: Apple, Competition, content, Hulu, premium, war