It's apparent that Hulu LLC, an online provider of TV shows and movies that launched in March, has been a phenomenal success.
But it's also apparent that the fledgling company faces challenges: Its corporate partners could see it as stealing some of their audience. In addition, competitors plan to offer similar Web services on television that Hulu can't yet match.
A joint venture between News Corp. and NBC Universal Inc., Hulu was one of the first Web sites to stream TV shows and movies under contract with major production studios. Though the Santa Monica-based company was launched amid skepticism over its prospects, it has since signed additional distribution deals with Warner Bros. Entertainment Inc., Lions Gate Entertainment Corp., and a slew of other studios and cable channels.
As a result, a consumer can go to the Hulu site and watch, for free, a range of TV shows and movies from various providers.
The latest sign of how far and fast Hulu has risen came late last month when Arash Amel, an analyst with London-based Screen Digest, projected Hulu would bring in about $180 million in gross revenue next year, the same amount Amel predicted for Google Inc.'s YouTube.com.
As such, Hulu is positioned as a leader in the online video market, which is worth about $700 million today and should grow to $3.4 billion by 2013, according to Forrester Research, a business and technology analysis company in Cambridge, Mass.
Hulu succeeded because it met an untapped demand for television and movies shows such as "The Office" and "Family Guy," and films such as "The Usual Suspects" on the Internet. The company makes money from advertising that runs before and during the videos.
The company declined to make an executive available for an interview for this story. In an e-mail, a spokeswoman said that Hulu's revenue had "exceeded expectations" and was optimistic about future growth.
But analysts pointed out that at some point Hulu's success might become an issue for the studios if they see declines in traffic on their video sites.
If Hulu continues to boom, "it will create a huge, huge competitor to NBC's and Fox's own Web sites," said Amel of Screen Digest.
Meanwhile, competitors have moved aggressively to catch up. Cable giant Comcast Inc., for instance, earlier this year rolled out Fancast, its online video-streaming service that has deals with all the major studios and TV networks, including ABC and CBS.
Comcast plans to introduce ways to let users program their home cable box and DVR recorder through the Fancast Web site, said Karin Gilford, senior vice president of Comcast Interactive Media.
"We see the trend," Gilford said. "Consumers are watching full-length content online, and it's important to Comcast that they do that on our platform."
That could spell trouble for Hulu, analysts said, because it doesn't have a way to unite its Web service with the TV set, where consumers still spend most of their time.
"The competition is coming, and Hulu doesn't really have a competitive advantage" said Bobby Tulsiani, a Forrester analyst in Connecticut. "They don't have integration into the living room, they don't have exclusive content."
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