Making sense of the Hulu-Disney noise

Disney's announcement of its deal with Hulu has gone unnoticed in the press, and you have to search hard for reports on the deal. So far, no one has offered any opinions on what the content partnership might mean for Hulu and the larger online video content space. OK, you get the picture.

Rampant speculation about how CBS, YouTube, Apple's iTunes Store, and others are going to be hurt by Disney content on Hulu has been equally balanced by scores of opinions quick to deride Disney's decision and declare the deal overblown and ultimately ineffectual. I couldn't help but side with the latter, due to the limited amount of content Disney is providing in the deal. But the equity stake and two-year commitment, coupled with NBC Universal and News Corp. renewing their licensing agreement two more years, are very important both for Hulu and its competitors.

A selection of ABC shows, Disney Channel programming, and Disney feature films will be available on Hulu, and they are not going to significantly increase traffic or revenue for the site. But Disney's equity stake and the license renewals are a vote of confidence in Hulu's model, and, more importantly, they foreshadow the eventual model I think Hulu should take.

CNET's Greg Sandoval touches on the possibility of a "Hulu Premium" in his coverage of the deal as a great potential source of future revenue for the site and other online video content aggregators. Sandoval quotes analyst James McQuivey proposing how Hulu could make more shows available behind some subscription wall and use the free, ad-supported version in tandem for a diversified revenue model. He also quotes Google CEO Eric Schmidt saying he expects micro-payments and other subscription models eventually for YouTube, though the site remains focused on monetizing through advertising currently.

Much has been made about the growing number of public service announcements Hulu serves alongside shows, prompting concerns over the company's advertising driven model. CEO Jason Kilar maintains that Hulu is ahead of revenue targets and is simply catching up to a burgeoning audience, but getting people to pay for content on Hulu would certainly help in this department.

I think if Hulu really differentiated a paid subscription option by offering significantly more content with no ads, it could have success. There is a growing consensus that free, ad-supported entertainment content sites simply won't make enough money through advertising to make them sustainable and viable replacements for current distribution models. But a free, ad-supported flavor of a site would be palatable if served with additional pay options.

I tend to think YouTube might even get there first with this idea, prompted by the size of its probable losses. Comcast's upcoming online video offering also could leverage micropayments the same way iTunes does, by having its content for free to subscribers, but also allowing the content to be discovered and purchased on an episode-by-episode basis for $0.99.

But of all of these companies, Hulu is the best-positioned currently to experiment with a paid/free mix, given its audience and content partnerships. The question is will it have success like iTunes, or flop like NYTimes Select? It's too soon to tell, as they haven't even committed to anything of the sort, but you have to think Kilar and Co. are pondering a move in this direction. 

Let me know what you think on Twitter, we're there now @fierceonlinevid.

- Pete