Hulu Plus Is Not A Threat To Netflix, They Are Two Different Services
With today's announcement by Hulu of their long awaited subscription service, Hulu Plus, it was only a matter of time before the blogsphere was quick to jump all over the news and suggest that Hulu is now a competitor to Netflix or that this some how gives consumers more reason to ditch cable. While it's easy to suggest this, the reality is that the business models, type of content, number of devices and other factors between Netflix and Hulu are very different.
CNET was quick to say that "Hulu has also made up ground on Netflix when comparing the number of devices that feature the services." But if you look at the number, that's not true. Netflix says they will be on 100 devices by the end of this year. Hulu looks like it will be on about ten. Devices like the Xbox 360 and others won't support Hulu Plus until next year.
Of course, for Netflix, none of their device success happened over night. It's taken Netflix three years and hundreds of millions of dollars to make this happen. Since Netflix does not rely on their streaming service to generate direct revenue, they can afford to spend the money and invest the resources to make their streaming offering as good as it is.
Hulu did just over $100M in revenue in 2009 and half of that money went back to the content owners. Compared to Netflix, Hulu has very little money to spend on R&D and can't dedicate the resources needed to work with dozens of consumer electronic manufactures to get their platform embedded into devices. Even Blockbuster, who is much larger than Hulu admitted they don't have the resources to work with all the hardware providers that they want to.
Not to mention, Hulu would have to design apps for a lot of these devices and none of that happens overnight. Hulu's CEO was even interviewed today talking about how each device needs to get a custom interface with new software. Just look at the amount of resources Netflix has put into this and it's still taken Netflix three years to get to the point they are at today. Hulu simply doesn't have the money or resources to replicate what Netflix has done anytime soon. That's not a knock on Hulu, it's just reality. Think of it this way. Hulu has been working on their Hulu Plus service for easily more than a year, and at launch, they will have only a few hardware partners. That shows just how long it takes and the work involved in getting a content offering integrated into a CE device.
The other big differences between the companies is the rate at which they move. Even though Netflix is much larger than Hulu, Netflix is very nimble. Talk to any of their hardware partners and they will tell you how easy it is to work with Netflix, how fast they get things done and how well their service works. Compare that to Hulu who is smaller than Netflix, yet is not known for moving very quickly and is completely new to working with CE manufactures.
Whenever someone says one service will replace another or at least compete with it, that means that it needs to provide a similar experience to what's in the market. Hulu is all about short-form content, TV shows, and Netflix is mostly about long-form content in the form of movies. Yes, Netflix has TV shows as well, but movies is their strength. Netflix has around 12,000 pieces of content and Hulu Plus will have about 2,000 to start. That's a big difference in the type and volume of content available.
As for those who suggest that Hulu Plus will now enable consumers to "cut the cord", that's just more hype. Hulu Plus and Netflix combined do not offer enough content for the average consumer. Sure, for some it will be sufficient, but not for the the vast majority of consumers. Hulu Plus will not start any kind of trend of cord-cutters.
Hulu's new subscription service is very straight-forward in what it offers and it's great that Hulu's CEO is very clear at where it fits in the market. At no time has he said it will replace Netflix, or that the cable companies should be worried. Hulu Plus is the first step for the company and this is not a sprint to the finish line. The battle for consumers eyeballs in the living room and across devices is only just beginning and there is a really long way to go before anyone is considered the winner. Hulu's Plus service is a great thing for the industry as it gives us another model in the market, another way to consume content and will enable other content owners to test the waters with new forms of distribution.
Will Hulu Plus work? Yes, but not like most people think. Hulu Plus is not meant to replace Hulu.com, only compliment it. Hulu Plus won't have millions of subscribers in the next few years and that's just fine, it does not need to. Hulu Plus is just another extension of the Hulu brand and is only the first of many types of content offerings to come. We should like Hulu Plus for what it is and not ike it by comparing it to Netflix, which it isn't.