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Jason Kilar, Hulu CEO  (Source: Patrick McElhenney/FX)
Pressure is mounting from content providers to make the switch to paid subscriptions

Hulu, a NBC Universal, News Corporation, and Walt Disney Company joint venture, has established itself as one of the most beloved video sites on the internet.  It practices a philosophy of quality over quantity, airing desirable content like television episodes from an elite group of content providers.  That means that while it may never have the net traffic of a free-for-all video site like YouTube, it has a much steadier audience and is arguably a more effective place to advertise.

Jason Kilar, Hulu's CEO, announced that the company has been profitable for two quarters now, as it enters its third year of existence.  Sources close to the company say that the company stands to make even bigger gains with the launch of the Apple iPad, for which Hulu is reportedly creating a custom app.

The company is not without some problems, though.  Hulu has 200 content suppliers, which received 50 to 70 percent of the advertising revenue from Hulu's video content.  Traffic has tripled over the last year to 903 million streams delivered in January.  Many content providers, however, are still complaining about their checks being too small.  They would prefer Hulu to adopt a subscription-fee based system.

Viacom was among the most frustrated, and it acted, pulling the plug on Hulu's rebroadcasted episodes of Comedy Central shows like “The Daily Show with Jon Stewart” and “The Colbert Report."

Still, Hulu pulled in $100M USD last year in ad revenue and could more than double that this year, according to Kilar.

Kilar reportedly is considering using the iPad as a test-bed for a subscription based service.  However, he seems wary of a user rebellion if he tries that.  He states, "Our mission is to help people discover the world’s premium content, and we believe that subscriptions can help to unlock some of that, including sports and movies and premium cable shows. We’re certainly open to subscriptions as a complement to an ad-supported model."

Another problem from Hulu is that it still hasn't delivered on its long-awaited iPhone app.  The app was expected in 2009, but never arrived; many are hoping it lands this year.

Despite these obstacles, Hulu seems unlikely to move out of the picture when it comes to internet video.  Its ability to become profitable without charging subscriptions is very impressive and hopefully content providers don't try to push to hard and mess up the good thing they started.

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RE: Hulu on XBOX
By SunAngel on 4/2/2010 1:49:43 PM , Rating: -1
Please don't take this the wrong way, but how can anything become huge, if no one is paying for it?

You see, like the article mentions, Hulu will only become big if it decided to charge. Lose a few subscribers today for lot more tomorrow. Hell, once Dailytech sells to Gizmodo I think this is the expected outcome.

RE: Hulu on XBOX
By lightfoot on 4/2/2010 2:34:38 PM , Rating: 4
More eyeballs on your content (and ads) results in more ad revenue. So long as the ad revenue outstrips the additional bandwidth cost it would be a net gain for everyone involved, including Hulu, the advertisers and the content providers.

RE: Hulu on XBOX
By damianrobertjones on 4/2/2010 3:49:07 PM , Rating: 2
As long as the ads don't divert to Russian malware pages.

RE: Hulu on XBOX
By Motoman on 4/2/2010 5:28:47 PM , Rating: 3 about Chinese malware pages?

RE: Hulu on XBOX
By amanojaku on 4/2/2010 3:45:15 PM , Rating: 4
Who said no one is paying for content? There's a payment mechanism that allows users to consume content for free, and it's been around for decades: advertising. Hulu has ads, and if it worked for the radio and TV it should work for sites like Hulu.

RE: Hulu on XBOX
By Granseth on 4/2/2010 4:40:05 PM , Rating: 3
It should actually work better on sites like Hulu since they can personalize the ads.

RE: Hulu on XBOX
By PrezWeezy on 4/2/2010 6:22:24 PM , Rating: 5
The same way channel 4, 5, 6 and 7 have become huge in TV. The user doesn't pay for it, Downy, and Clorox, and Chilies, and GE, and GM and Ford pay for it. How does Google make money? Ads are a viable way to profit. And as more people watch Hulu each ad space becomes more valuable because it reaches a bigger audience. The same way the Super Bowl ads are so expensive. Subscriptions are great, but Ads can support a lot too.

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