Is Hulu Just a Glorified Tivo?

There's a paradigm shift that's impacting the entertainment industry, and it's already changing how, when and where we watch television shows and movies. For example, I watch most of my movies and television shows on my Mac laptop, either via a download from my Tivo, a show on, a DVD or a downloaded video. Despite this, I don't think the entertainment industry is evolving fast enough, and I think they run the risk of alienating customers (me being one of them, of course).

Paradigm shifts in any industry are scary for the established companies in that industry. They're disruptive. They change how the rules work. Companies have to adapt or they risk becoming irrelevant. No company, especially a long-established and profitable one, wants to see its business erode or even vanish, and that's very possible during the turbulence of such a shift.

The companies in the entertainment industry, particularly the television networks and the cable companies, are scared that they might be impacted the way the music industry was a few years ago. The record labels amply demonstrated that failing to adapt to a paradigm shift can put entire companies at risk. The industry underwent a distribution revolution, evolving from primarily album (CD) sales in brick-and-mortar stores to online album sales, digital downloads and easy file sharing (and the specialized brick-and-mortar stores mostly disappeared).

The record labels also demonstrated another counter-productive tactic. Customers already had a low opinion of record labels. They were widely perceived as organizations that exerted undue influence, provided little additional value and, through excessive greed, actually took revenue that the customers would rather see go to the creative artists that they admired. It didn't raise their image any when they started suing lots of customers, generally just "regular" people, for copyright infringement.

OK, the music industry is easy to pick on. People really disliked the record labels. But if one needs another example of an organization that failed to adapt to a paradigm shift, all one has to do is look at AOL.

When Internet connectivity shifted from dial-up to broadband, AOL failed to adapt. Broadband connections were always-on, so customers didn't need the AOL Client to get online anymore. They were already always connected, and widely available browsers provided them with all the tools they needed to leverage the Internet.

Other revenue streams were potentially achievable by AOL, as proven by sites like MySpace and FaceBook (which leveraged social network strategies that had, in many cases been pioneered, and often abandoned, by AOL). The result is that AOL subscriptions have plummeted, revenue has dropped dramatically and the company has been cut to about 20% of the size it was when it was a high-flying dynamo.

OK, so now let's talk about the entertainment industry. Here's the paradigm shift that's going on, in a nutshell:

I want to watch whatever I want to watch, when and where I want to watch it.

The days of appointment television are over. Remember that, I'm going to hit that point a couple more times.

Picture this, it's mid-season and you discover a new television show that you like, let's use the new murder mystery series, Castle, as an example. As a customer, I want to be able to go and watch all of the episodes I missed. Not just the 5 that my cable network, Comcast, stores for any user to watch. I want all of them. Echoing the cable companies, the television networks have adopted the concept that only the last 5 episodes of a series should be available on Hulu, a leading site that makes TV series and movies available for online viewing (with advertising). Well, heck, I can do that with my Tivo ... and I can fast-forward through the commercials. I don't need, or want, Hulu to be a glorified Tivo.

So, here I am, a customer who wants to watch episodes of your television series, and I'm willing to watch it with commercials ... and Hulu won't show it to me. Because their agreement with the television network says they can only make the 5 most recent episodes available. Are you kidding me?

Yes, I can buy Castle, Season 1, on DVD. But that doesn't help me catch up on Season 2, which is well beyond 5 episodes. Maybe this example sounds trite, but here's what it boils down to. I want to watch your show, and you won't show it to me. Despite the fact that I'm willing to watch it with advertising.

Need another example? I'm intrigued by the commercials I've seen for a show called FastForward. I missed all of the early episodes. Since most dramas nowadays are serials, with storylines that continue from week-to-week, starting in the middle of a season just isn't attractive to me. Sorry, tough luck, no way to catch up. Come back in a couple months and maybe the series will show up in re-runs, if it's successful. Or wait even longer and it'll be on DVD.

The bottom line here is that, just as with the music industry, I think some companies have undue influence and are failing to adapt to the paradigm shift in how customers want their entertainment to be delivered. This is likely to get worse if Comcast succeeds in buying NBC, which would also give it control of Hulu. Generally, the Internet has the effect of making distribution widely available, and thereby reducing the impact of the middle-man. All I see here is middle-men trying to get bigger so they can wrestle the paradigm shift in the direction they want it to go.


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