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CEO and VPs are reportedly contemplating jumping off the ship on their golden parachutes

Since its inception, Hulu has had a rather baffling ownership stew and a tough goal -- making streaming, exclusive internet video content profitable.  Yet somehow it made it work.

But all is not perfectly at peace in the land of Hulu green; Variety has an interesting piece detailing Hulu's growing pains, including preparations for the possible departure long-time CEO Jason Kilar.

I. Will Kilar Seize His Golden Parachute?

An internal memo quoted by the report writes, "Outline transition plan for new CEO. Discuss potential candidates and process."

Hulu has been kicking around on the net since March 2007 and Mr. Kilar, a Harvard Business School grad, has been leading it since June 2007.  Originally Hulu was to be an independent service -- co-owned by News Corp. (NWS) and Comcast Corp. (CMCSA) and distributed by Myspace, Yahoo, Inc. (YHOO), Comcast, and Facebook, Inc. (FB), among others.  The site went live in 2008, and instantly made a small splash, being one of the few pages to rival Google Inc.'s (GOOG) YouTube.  Then in April 2009, The Walt Disney Comp. (DISjumped onboard, purchasing a 27 percent stake.

Since then, News Corp. and Disney have taken a leading role in terms of steering the company's direction, as Comcast's acquisition of co-owner NBC Universal has prevented it from participating in decisions for antitrust reasons.

Things became complicated when the pair agreed to a management buyout from founding co-owner Providence Equity Partners.  Part of the terms of that buyout was that Hulu's founding managers -- including Jason Kilar -- could now cash out a significant number of vested shares.  For Mr. Kilar, who holds approximately 5 percent of Hulu shares, this may amount to a $100M USD compensation package payday -- pretty compelling temptation to leave.

Jason Kilar
Jason Kilar could score $100M USD if he leaves Hulu. [Image Source: The Hollywood Reporter]

The Hulu memo discusses eliminating exclusive content from the "free" (ad-supported) homepage.  This means that Disney and others could potentially cut deals with Google's YouTube, weakening Hulu's position.  It also eliminates "content parity", meaning players like Disney (owner of ABC) and News Corp. (owner of FOX) can hold back content for their own websites, to differentiate them -- further weakening Hulu.

Lastly, it also discusses cutting back on Hulu's international efforts.  News Corp. expressed its desire to "limit" its investment in bringing Hulu International to $30M USD, while Disney "would like to discuss a less ambitious product which requires less capital investment but which could prove to be a good business."

II. The Networks Don't Know What They Want

Such provisions could yield a smaller, but more profitable Hulu, which could help drive away a high-profile executive like Mr. Kilar.  But he insists in past interviews that he wants to continue to lead the business and help it mature.

Hulu is worth $2B USD today, approximately twice its $1B USD founding value.  Providence Equity Partners is thought to have approximately doubled its $100M USD, 10 percent stake in the buyout.

The streaming video site is expected to make about $420M USD -- a level of monetization experts call impressive.  Many view Hulu Plus -- an $8 USD/month premium service -- as key to the site increasing its profits.  Last year, Hulu pulled in almost $200M USD from its 2 million Plus subscribers.  Boosting that number could mean bringing Hulu closer to moneymaking parity with major television networks like FOX, who draw far bigger revenues from advertisers and distribution/licensing payments.

ABC on Hulu
Networks like ABC (Disney) and FOX (News Corp.) want to profit off of premium Hulu subscriptions, but they also want to yank exclusive content from Hulu to increase profits at their own private sites, yielding a troubled marriage.

The report also mentions fears that two other major executive shareholders -- Andy Forssell, senior VP of content, and Jean Paul (J.P.) Colaco, senior VP of advertising -- may leave/cash out, as well.

In short, this is a very volatile time for Hulu.  Its big media network owners are waiving in their commitment, even as its top leadership consider seizing their golden parachutes and leaping off the ship.  Ultimately the big media owners may be most to blame for this.  

While Hulu is a bona fide success story, today rivaling YouTube, its big media ownership appears quite befuddled. It sends quite the mixed message for network investors to say they want to grow premium content customers, while also discussing removing premium content from the common site, to hoard their on your own private site.

Ultimately, this may be a case of big media's greed killing a good thing they have going.

Source: Variety

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By jnemesh on 8/20/2012 4:54:54 PM , Rating: 5
Torrents! What do you know? ALL of these shows and more are available FREE OF CHARGE (yes, you are technically stealing them!) on the internets!

Guess what guys? You have TWO options!

1) make your content available for a REASONABLE charge on popular services like Hulu Plus...or

2) watch helplessly as millions of potential customers steal your programming and don't pay you a cent!

We WANT to give you our money! Really, we do! Just give us an EASY, SIMPLE way to find legitimate content and we WILL pay! Keep up this ASININE ploy to protect your legacy business models, and we will just steal it! It really is THAT SIMPLE!

By FITCamaro on 8/20/2012 5:07:28 PM , Rating: 2
I agree that I really do want a simple way to get all my primetime viewing needs online. I know I can get shows through the websites of the various networks for free. But I want a simple to use interface for that. I tried PlayOn and it wasn't great.

But now we just need ESPN to start offering a paid online portal for its live content.

By aharris02 on 8/20/2012 5:56:24 PM , Rating: 5
TheOatmeal's Game of Thrones comic said it best.

By StevoLincolnite on 8/20/2012 6:38:43 PM , Rating: 3
That couldn't be closer to the truth.

Guess they don't want our money.

By StevoLincolnite on 8/22/2012 3:10:35 AM , Rating: 2
Except... You're NOT stealing you are copying.

They are VERY different.

So instead of stealing a car, you just copy one that's exactly like the original one in every single way.

The original maker does not loose out on anything.

Besides, I have no "cable" or paid television services where I am so I don't even have the option of paying to watch it at all.

If it's on free-to-air television, they also don't loose anything if I download a television show, why? Because I'm not part of the Nelson statistics gathering shenanigans, so they have no idea if I even have my television turned on.

Besides, since when do companies think they are entitled to our money? I'll spend it one what I think I should spend it on that I deem worthy of my hard earned cash.

They release something that is priced right and is actually available, sure I'll buy it without a second thought, otherwise companies are not entitled to my money.

By Jeffk464 on 8/20/2012 6:01:14 PM , Rating: 2
Seems like downloading network tv shows on torrents is a grey area since they are freely available over the air. I put an antenna on the roof and record them legally to my Home Theater computer, really whats the difference? Anything on a pay service HBO, streaming movies from amazon, etc is clear cut. The studios will never learn that the more hassle they make it the more they drive people to torrent. They should be thrilled with HULU its convenient and you can't bypass commercials.

By BugblatterIII on 8/20/2012 6:42:47 PM , Rating: 2
It's quite simple; give us a way to pay without ripping us off and without making us jump through hoops (no Hulu hoops! Sorry...).

That's not just what the OP wants them to do; anyone with any sense will want that too. Sadly that doesn't include media company executives.

If they try to rip us off then we'll rip them off. Sometimes two wrongs make a right...

By BugblatterIII on 8/21/2012 9:06:24 PM , Rating: 2
That isn't all piracy does, it puts the power back in the hands of the consumer. Without that power we either bend over for whatever those greedy pigs impose on us or we do without. Don't really see why we should do without because of their greed. That's not because of a sense of entitlement, it's justice.

I spend hundreds on software and I subscribe to Napster for music (having also tried Spotify and Rdio) and Sky HD for TV. I could get all of that for free with minimal effort. I'll pay, just don't try to rip me off.

By someguy123 on 8/20/2012 11:20:45 PM , Rating: 2
Pretty sure he means he can't even pay them if he wanted to, especially now that they're pulling more content for "exclusive" deals.

Look at steam. That thing is basically a subscription plan with no physical assets and no guarantee that your account will be maintained, yet it has twenty million users buying tons of games, all thanks to how easy it is. Hell plenty of people on steam stock up on dozens of games during sales and don't even bother playing them.

By Jeffk464 on 8/20/2012 11:36:52 PM , Rating: 3
I'm not saying that, the end results are saying that. The music industry wasn't making any money until they agreed to sell music on sites like itunes and amazon. Their concept was to force music fans to go to the store and buy cd's when what they wanted was to buy downloadable copies online.

By Jeffk464 on 8/20/2012 11:44:04 PM , Rating: 3
I don't think you need to stop buying content to show a drop in demand. You need to stop spending on media from expensive sources. If your local theater sets the price to high wait for movies to come out on blu-ray. The studios stop offering their films to netflix - go to redbox. Show the studios that people won't accept overblown pricing. By the way I decided cable was to expensive for the couple of decent channels you end up with so I just stuck an antenna on the roof. If discovery channel puts on a decent shows, seems to be less and less, I will buy those shows on amazon if I have to.

You know the funny thing is that the response to the millions of people getting fet up with the cost of cable and cutting the cord was for the cable companies to raise the cost.

By Jeffk464 on 8/20/2012 11:47:18 PM , Rating: 2
PS I also sold my shares of Comcast, whether they like it or not they will eventually just be an ISP.

By inperfectdarkness on 8/21/2012 8:57:38 AM , Rating: 2
Can we get a 7 on this? It really feels like stupid is contagious with media companies.

By Arsynic on 8/21/2012 9:33:10 AM , Rating: 2
Couldn't have said it better myself. I'll be damned if I have to go to 10 different ad-riddled websites just to view content when I can pay a fee for having them all available through one outlet.

This is all about hanging on to their stale and antiquated business model.

By Rukkian on 8/22/2012 9:38:45 AM , Rating: 2
While I agree with the sentinment, I do not think pirating is the answer.

I simply decide it is not worth it if they make it so I have to go to 10 different websites, each with their own plugin for your browser and having sign up. I don't even goto Hulu much, but when I want to get a show I missed, that is where I head. Unless it is an excellent show that I feel I just can't miss (very very rare), if it is not on Hulu, I just skip it.

"Spreading the rumors, it's very easy because the people who write about Apple want that story, and you can claim its credible because you spoke to someone at Apple." -- Investment guru Jim Cramer

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