Ina Fried

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Hulu Boss Jason Kilar: Who You Callin’ Clown Co.?

Well, it must be prime time somewhere.

It’s not even 8 am PT yet here, but we’ve got a full day of speakers at D: Dive Into Media, and first up is Hulu CEO Jason Kilar. I’m sure we’ll hear him talk about the future of Web video, not to mention his own position and that of his company in said future.

8:08 am: We’re getting just a bit of a late start, as SoCal traffic is messing with the schedule just a bit.

8:19 am: I think we are close now. Attendees are grabbing seats.

8:24 am: Looks like you still have some time to catch up on your favorite show on Hulu. But it shouldn’t be too much longer now.

8:27 am: Here he is.

Peter: I’m a little surprised you are here (refers to memo a year ago that a lot of people thought would get Kilar canned).

Are you surprised you are still running Hulu?

Kilar: No, I am not.

You have to be a bit crazy to do this. He notes that the company was initially called Clown Co.

If it was easy, everyone would be doing it.

8:28 am: What were you thinking when you wrote that memo?

Kilar encourages people to reread the memo. “I think it stands up today.” I actually think that when it comes to bundles, there is tremendous value, but you have to be very careful in how you construct that. Customers vote with their wallets.

8:30 am: Why print the memo?

When you are starting a new business, it’s important to explain yourselves. That was a very important moment for the company.

The entrepreneurial jouney is not a smooth one or an easy one.

8:31 am: Kafka: One of the reasons it was called Clown Co. was the idea that the media companies couldn’t build a successful joint venture, and that the interests of the parents and the company would necessarily diverge.

8:32 am: Kilar: It’s not unique to the history of media. Kilar notes that TV was originally seen as a threat to the movie industry.

It turned out it was the best thing that ever could have happened to content companies. The Internet could be the same way.

8:33 am: Kafka: The broadcast content industry is now getting paid in the form of retransmission fees, and distributing its shows in many forums. Is there the same need for Hulu to exist as there was four years ago?

Kilar: I think there’s more reason for Hulu to exist now than there was four years ago.

8:34 am: Some of the content isn’t there, or is being “windowed.” You have to wait eight days for some shows. Are customers still as happy?

Kilar: There’s actually more content. In addition, we have Hulu Plus (the paid service), which allows customers to get content sooner, and with more content.

Kafka: Is the subscription business a profitable one?

Kilar: Clearly still in investment mode, but a lot of opportunity to make money.

It allows us to pay the content community more per user per month than any other service. “We’re thrilled about that business. It’s a very scalable service. It’s our fastest growing service.”

8:37 am: Kafka: You have to pay for TV, but not for laptop. Isn’t that confusing?

Kilar: Agrees, the distinction might be confusing to our grandkids down the road.

“There’s no doubt there is this transition happening.”

8:38 am: Kafka: How do you think the content owners think about the value Hulu delivers?

If I were in their shoes.

You’ve got this amazingly large business (broadcast TV) that is very robust and very healthy, so you are constantly thinking about that.

At the same time, you can’t be blind to what you are hearing from consumers.

If I were in their shoes, I’d balance the obligation to that existing business, but plant seeds that allow things to bear fruit for the long term.

This is not dissimilar to the introduction of television. People used to go to movie houses three or four times a week to watch “premium content.”

8:44 am: Kafka: What about YouTube and others?

Kilar: There’s going to be many winners in this space. Online video and online advertising space.

Kafka: Why did owners put you on the block then?

Kilar: You should ask News Corp.’s Chase (Carey) this. (Carey is on stage later.)

It’s fair to say the process that happened last year. … We were approached by a company.

Kafka: Yahoo.

Kilar: We never commented on it.

Kafka: Yahoo.

Kilar: It was far more public than I would have liked. I’m a private guy.

Kafka: What do you think happened?

Kilar: Things change … people have different points of view.

It wasn’t dramatic. It wasn’t salacious.

Kafka: One thing that you heard was that the bids weren’t high enough and/or that the content owners weren’t willing to give a long enough rights deal to make it viable.

Could you ever sell this company or take it public? Can this work as a standalone company?

Kilar: We have 330 content partners, only three of which are investors in the company.

Kafka: You’ve said you are going to spend $500 million in content fees this year. Does that include money to main broadcasters?

Kilar: Yes. Main investment is in existing content, though spending a little on new, exclusive content. Gives them some healthy differentiation.

It’s not the thing, but it is an important thing.

Kafka: Is it important to have a lot of exclusive content?

Kilar: It’s important to have some exclusive content.

8:51 am: Kafka: Folks describe you as “rerun TV.” Are you OK with that?

Kilar: At end of day, we search for Hulu and Hulu Plus and see what consumers say. Kilar reads on Twitter a lot, but doesn’t post much.

8:52 am: Audience Q&A. Hulu said it brought in $420 million last year, but less than it had been on a pace to do.

Kilar: In Q3, specifically, the ad market was very soft. Things rebounded in Q4. “We’re pacing very well. I’m not going to talk about the financials of the business.”

Kilar said it was up 60 percent from the prior year, and ahead of its original plan for 2011, which was for $408 million.

Kafka: Will you stick around?

Kilar: I’ve only done two things. One was Amazon for nine years. The other is Hulu. I’m not the kind of guy that dabbles. I tend to go deep.

Kafka: Do you think you will be here in a year?

Kilar: Just judge me on my history.

Kafka: Very eloquent side step. I appreciate it.

8:55 am: TV everywhere. How does Hulu fit into that?

Kilar: Differentiation is important. When we think about services like TV Everywhere, which has been around as a theory for a while … Hulu Plus is designed to be different from TV Everywhere, which only has four or five episodes.

TV Everywhere is getting better, and will continue to, but Hulu Plus is designed to be different.

8:58 am: Hulu Plus for Apple TV?

Kilar: It’s a juicy question. I don’t have a juicy answer. We don’t talk about our product road map.

Q: Can we expect it in 2012?

Kilar: We don’t talk about our product road map.

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