This is a very relevant article to our class discussion on Hulu:

It confirms some of the quant analysis we did in class:
- “Hulu’s deals with content owners revolve around an advertising revenue split; the owners typically receive 50 to 70 percent of the revenue, and Hulu keeps the rest”
- “Viacom’s decision may suggest that the economics of Hulu make less sense for content providers that lack equity in the Web site.”

My first take on this, which the article strongly hints at with the below quotes, is that this is simply a negotiation tactic taken by Viacom to improve its split and/or upfront fee or even, more aggressively, move in as an equity partner.
- “Hulu said it was talking to Comedy Central about “a number of opportunities,” and said viewers should “stay tuned.””
- ““There have certainly been instances where there was a premium paid for what you might call the ‘halo effect,’ ” the person involved in the negotiations said.”

My deeper read is this: If I were at Viacom right now, I’d be most interested in using this as an opportunity to measure the cannibalization effect of Hulu on its own streaming sites (e.g., thedailyshow.com).  Given similar ad selling teams, Viacom is likely monetizing its own sites at a comparable average CPM to Hulu, but doesn’t have to share 30-50% with anyone (though would have to cover its own hosting costs). The question it needs to answer with its internal metrics once TDS and TCR are off Hulu is, to what extent was Hulu viewing additive vs. cannibalistic.  At the same time, Hulu will be able to study to what extent TDS and TCR are anchor content — content that draw in users who then surf around the site to non-Viacom content, the “halo effect” — as opposed to being easily substitutable.  My hunch is that Hulu is fairly cannibalistic (personally, I’ll just start watching TDS on its own site and stop going to Hulu), and that most Hulu visitors are content-driven and it will see a drop off.

Conclusion: Good tactical move by Viacom, and unlike past user-unfriendly Viacom moves, this one doesn’t really affect users since Viacom provides the same content on its own sites.

I’d be interested to hear others perspectives on this.

Do you think the three existing equity partners would welcome Viacom (or CBS, or anyone else) as equity partners at this point?

- Jon LinkedIn