Peter Kafka

Recent Posts by Peter Kafka

Hulu, Networks Close To New Deal

Hulu and its network TV owners are close to a new deal that will keep programs from NBC, Fox and ABC on the Web video site.

An agreement to extend the content licenses that owners News Corp., Disney and NBCUniversal signed two years ago should be in place within a week, according to people familiar with the discussions.

The pact is being negotiated by Hulu managment, led by CEO Jason Kilar, and officials from News Corp. and Disney. Investor Providence Equity Partners also has a say.

But NBCUniversal, one of the site’s original owners, gave up its board seats and management role in the joint venture earlier this year as part of its Comcast merger agreements; it will have to accept whatever terms its partners arrange.

A Hulu rep provided this statement from Kilar, and said it represented the view of all four companies involved in negotiations:

News Corp, Disney, Providence and the Hulu team have been engaged in productive discussions to extend our existing content agreements a number of years. Keep in mind that our existing content agreements already extend for several more years; these discussions would extend the term further and also extend our separate Hulu Plus content agreements.

Between the operating results and formalizing the above, it is shaping up to be a big year for Hulu.

I don’t have details on the new pacts, but people familiar with the negotiations tell me that the joint venture’s basic structure will remain the same: will continue to be an ad-supported site, while the Hulu Plus subscription service will offer more programming and the ability to watch it on devices like Apple’s iPad.

The new deal terms are unlikely to change things that will be obvious to casual Hulu users. It’s possible that some programs may be withheld from the site, but it’s more probable that the changes will affect things like programming “windows,” which determine when a show turns up on the site and when it disappears, and how much Hulu pays for the content it shows.

The terms may also give content owners more flexibility to distribute their programming on other digital outlets.

Hulu’s original premise was that the site would would have co-exclusive rights to programming from its networks’ partners/owners–shows would stream on the networks’ own sites and, and nowhere else. But my hunch is that programmers will want the ability to offer their stuff to other distributors.

Disney CEO Bob Iger seemed to hint at this during his earnings call this week, when he said that Disney supported Hulu, but not exclusively: “We don’t intend to let a platform—even one we own—get in the way of doing what we think is right.”

The new deal will put to rest any idea that Hulu’s network owners want to kill off the site. That notion has been floated in part because some of Hulu’s original backers, like former News Corp. COO Peter Chernin and NBCUniversal CEO Jeff Zucker, have left their jobs. (News Corp. also owns this Web site.)

More important is that the media landscape has changed since Hulu was assembled in 2007. At the time, NBC and News Corp. officials were primarily interested in building a site that could compete with Google’s YouTube.

Now, Hulu’s owners are trying to extract new and/or increased fees for the programming from cable and satellite services, as well as services like Netflix; offering their shows for free on Hulu makes that harder.

And yet one more question mark about Hulu’s future popped up in February, when Kilar wrote a blog post challenging the TV industry’s business model. The move angered some of his bosses, and led to speculation that he would quit or be fired.

Tempers have cooled since then, but that doesn’t mean Kilar will stick around indefinitely. I’m told that his contract expires in July, and that if he wanted to he’d be able to stay on. I wouldn’t be surprised if he left for something else.

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work