Execs Rip Hulu for Giving Away Content

Written by Steve Donohue

Wednesday, September 23. 2009 at 06:00 PM EDT 2 comments

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NEW YORK -- Taking shots at Hulu for its strategy of giving away hit TV series and movies online for free, top media industry executives said here today that the best model for content owners to pursue is a hybrid approach that relies on both subscription and advertising fees.

“You can’t just give stuff away for free. It just can’t happen,” Major League Baseball Advanced Media CEO Bob Bowman said at an Advertising Week panel at The Times Center. “I don’t see premium content publishers doing that [Hulu distribution] forever. They’ve done a good job. It’s a marvelous site, but I don’t understand the business model.”

Bowman, Verizon Communications Inc. (NYSE: VZ) vice president of content strategy and acquisition Terry Denson and YES Network CEO Tracy Dolgin threw their support behind a hybrid subscription and advertising distribution model, and also touted the cable industry’s efforts to distribute subscription content online through projects like TV Everywhere, which will rely on authenticating that a consumer is a paying cable subscriber before he can access premium video content online.

“I think there is going to be a shakeout. A hybrid approach will ultimately win out. There is only so much premium content available that people will be willing to pay for. If everything was a Mercedes Benz, there would be a different look on the highway these days,” said ad agency veteran Charlie Rutman, a former president of Carat USA who is now president of End Zone Communications.

Dolgin, who moderated the panel, said the TV business needs to avoid the mistakes made by the music and newspaper industries. “The TV business right now is at the crossroads of what’s going on between old media and new media.

“In the music business, as theft accelerated ... they didn’t get ahead of the trend, and they offered consumers no option but to steal if they wanted to get the product the way they wanted. The newspaper industry sort of made the opposite mistake to some degree and is suffering because newspaper publishers opted to make their product free, and are now scrambling to put up [pay] walls. Once the horse has left the barn, it’s hard to get it back in,” Dolgin added.

Verizon, Major League Baseball, and YES Network already have some experience at authentication. Earlier this year, Verizon began offering live online video from New York Yankees games to FiOS TV and FiOS Internet subscribers that already subscribe to YES. Cablevision Systems Corp. (NYSE: CVC) offers the same product to its iO: Interactive Optimum customers.

The bigger challenge, according to Denson, will be for Verizon and other pay-TV providers to develop a TV Everywhere distribution system that has an interoperable authentication system that will work with multiple providers and TV programmers.

“It’s different, because you need the cooperation of all of the major constituents,” Denson said. “The content suppliers have said that they’ll come, but there are certain baseline parameters [for authentication] that they expect to be in place.”

Another challenge for programmers and distributors is to make TV Everywhere Web distribution as seamless and easy to use as Hulu, Denson added.

Also worth noting from Wednesday’s panel: