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ABC-Hulu Deal a Blow to YouTube

Aggregator Makes Big Stride in Quest for Long-Form Supremacy

Hulu got one step closer to its Super Bowl ad promise to take over the world last week by bringing Disney-ABC into the fold.

The deal, announced Thursday, dashes YouTube’s hopes of landing full episodes from the broadcast network on its site in the near term and bolsters Hulu’s position in the race for premium online content.

Under the deal, Disney becomes a joint-venture partner and equity owner of online video aggregator Hulu, which has become the No. 3 player in online video in a little more than a year. The deal, which has been expected for several weeks now, unites Disney and its TV networks with NBC Universal, News Corp. and Providence Equity Partners as joint owners of the site.

For consumers, the deal means a host of major series—including “Desperate Housewives,” “Lost,” “General Hospital” and “The Secret Life of the American Teenager”—will be available for viewing via Hulu. Disney also will put some of its film library on the site.

Closing the deal took on a new urgency in the last few months as Hulu rapidly expanded its reach, in part because of an advertising campaign that started with a spot featuring Alec Baldwin that aired during the Super Bowl.

In March, Hulu served up 380 million streams to nearly 42 million unique visitors in the United States, according to comScore, behind only Fox Interactive and YouTube. The latter still maintains a massive lead in views, delivering nearly 6 billion streams to 100 million users in March.

But YouTube’s Achilles’ heel has proven to be luring advertisers to its site. Although YouTube has inked deals with premium providers like Sony and even Disney-ABC (to run short-form Disney-ABC content), the Disney-Hulu tie gives Hulu a leg up in the all-important battle for the premium content that attracts advertisers.

“This is a major win for Hulu, because the YouTube deal happened a few weeks ago and this brings Hulu to parity if not better,” said Will Richmond, analyst with VideoNuze.com. “This continues to suggest there is a real battle for aggregator supremacy between Hulu and YouTube, and even though YouTube is many times the size in terms of traffic, Hulu has made a lot of progress in a short amount of time.”

The battle between Hulu and YouTube is not black-and-white, however. Hulu focuses on premium content, and while YouTube is bolstering its lineup in that area, it’s also committed to a broad range of video. Also, YouTube has said it is exploring ad formats not just for premium shows but for many types of content.

ABC said its full episodes are profitable and inventory on its ABC.com Web site is sold out. Working with Hulu gives the network the chance to reach new viewers and sell more ads. In similar fashion to Fox and NBC, ABC will be able to sell a portion of the ad inventory in its programming on Hulu to its advertisers.

A Disney-ABC spokeswoman wouldn’t comment on the specifics of the agreement, but sources close to the deal say Hulu has landed an exclusive window for ABC shows on the Web. While ABC will continue to carry its shows on its own site and on those of existing syndication partners including AOL, Veoh, Fancast, Cox.net and its local broadcast partners shortly after they air, ABC won’t strike additional deals with online aggregators for a limited period of time. That stipulation effectively puts YouTube out of the running as a possible new partner for full episodes.

That’s a tough pill to swallow for YouTube, especially after the site struck a deal in late March with Disney-ABC to carry short-form content on its site. Analysts had viewed that deal as the jumping-off point for YouTube to soon feature full episodes from the broadcast network.

YouTube issued a statement on the deal. “More content coming online in more places is a win for consumers and provides further validation of the growth of the online video market,” the company said. “According to a recent study, the average YouTube viewer spends nearly 150 minutes a month watching videos on YouTube. We expect numbers like this to grow on our site and across the Web as more niche and mainstream video content continues to be uploaded and enjoyed.”

The Disney-Hulu tie-up also leaves CBS as the odd man out. Earlier this year, Hulu pulled its programming from CBS-owned TV.com, which also carries full-length episodes of TV shows.

CBS issued this statement on the Disney-Hulu deal: “CBS has long employed open, non-exclusive content partnerships that allow fans across the Internet to engage with our programming in such a way that we control our distribution, sales and profit. We continue to discuss similar arrangements with additional partners as we grow our online audience based on the strength of our content and the passion of the communities it creates. The company also believes that controlling our own rights for that content—in all media—preserves its value in a multiplatform business system.”

The deal gives Disney-ABC a wider reach online because Hulu now can syndicate the media company’s programming to many of its existing third-party partners, including Yahoo, MSN and MySpace. Those sites have not previously had access to Disney-ABC programming.

Hulu and its Web partners will rely on Hulu’s video player, marking the first time ABC has moved off a long-standing policy to syndicate its content and its player together. ABC’s existing deals with AOL, Veoh and other sites call for those sites to carry the ABC.com player, known for the quality of its user experience. But Hulu’s player also has a good reputation for user experience.

Adding Viewers

In addition, Disney-ABC can reach new audiences for its programs. ABC’s internal research and data from other parties showed that while ABC.com was reaching core TV viewers, Hulu was bringing in viewers who weren’t hard-core network TV users. Indeed, comScore data indicated only 8% of ABC.com users visit Hulu, while just 13% of Hulu users visit ABC.com regularly.

Disney thinks there’s room to grow audiences for both ABC.com and Hulu, and to turn casual viewers of its shows into hard-core fans.

The deal is a big vote of confidence in the future of online video for longer-form entertainment, said Kaan Yigit, analyst with Solutions Research Group.

“ABC is the No. 1 ‘must keep’ brand in our research overall, and especially among women, and Disney is the No. 1 brand among women with kids under 12 in our tracking research,” he said.

“This also will begin to broaden the reach of Hulu, which to date is still skewing young and male”—in fact, two-thirds of visitors to Hulu are male, he added.

The agreement signifies the value of scripted programming for the online business model, said Mitch Oscar, executive VP of televisual applications for media agency MPG. “Hulu is a great experiential destination and will be hard-pressed to thrive without premium content,” he said.

But once exclusive windows run out, the key to success for online destinations will lie in metrics, audience makeup and innovative ad formats, Mr. Oscar said. Sites that can provide detailed information to advertisers on what consumers are watching, how they are watching and how that syncs up with on-air viewing will be best positioned to win ad dollars, he added.

Comments (4)

sloane:

One advantage youtube still has over Hulu....you can view youtube videos outside of the U.S. (from anywhere, I think?), whereas Hulu doesn't have this available yet...

John Tantillo, a branding expert, publishes a weekly brand winner/loser post on his marketing blog. Hulu was this week's Winner--for becoming the third most popular video site on the web in only 18 months (according to a NYT article).

Full post on Hulu (brand winer) and newspapers (brand loser).

Marcus:

Viewing outside the U.S. is a licensing issue, not a technology one. Whatever the terms with Hulu, I strongly doubt there will be open worldwide viewing of major network content outside the U.S. due to licensing constraints. So it's not a question of Hulu not having this "available," it's a matter of the individual deals by network and in some cases even by show. YouTube's short-form content is not likely to be affected because those clips (typically promos and other marketing vehicles) are not subject to the same licensing as long-form premium content.

Jan DeSouto:

Hulu pulled its content from CBS-owned TV.com because CBS had earlier removed all its shows from Hulu. What goes around comes around!

Marcus must be an American, because anyone outside of the U.S. who goes to YouTube and then uses an anonymous proxy service to visit YT sees a night and day difference in what you do and don't see. Geofiltering is alive and well on YT. Most noticable is an absence of "Shows" tab when you don't use a proxy. No full-length TV shows and movies.

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