In a blog post, CEO Jason Kilar blames the shortfall on a “soft advertising market (economy) in the second half of 2011.”

The numbers: Hulu did $420 million last year, via a combination of ad sales and revenue from its Hulu Plus subscription service. But during the first half of 2011, it had told the world — several times — that it was “on pace to approach” $500 million.

In retrospect, it’s easy to see when sales started softening. In July, when Kilar reported his company’s Q2 numbers, he was still offering the same $500 million revenue guidance. But in early October, when he reported Q3 numbers, the guidance had disappeared from his update.

There are a whole lot of people who would like to report 60 percent annual growth. And the fact that Hulu revenue missed earlier projections by 16 percent  – “overall the Hulu ad business grew aggressively and Hulu Plus materially exceeded our plan,” Kilar notes in his post — isn’t going to be the biggest issue for the service by a long shot.

Hulu’s management and its owners — Providence Equity, Comcast, Disney and News Corp. — need to reach a fundamental agreement about the video site’s direction, and how the site fits into today’s entertainment landscape. (News Corp. also owns this Web site.)

But it’s still worth noting the miss, because Hulu is both a digital ad business and a digital ad business that sells very premium video.

It’s an article of faith among digital ad bulls that the industry will keep growing even if the larger economy takes a hit, because ad dollars will shift from old media, anyway. And advertisers are supposed to be clamoring for the tv shows and movies that Hulu sells — which is one of the reasons Google is trying to shift upmarket from dogs on skateboards, with its “channels” strategy.

We’ll start hearing other reports on the state of last fall’s ad market, and the outlook for the future, over the next couple weeks, when public companies start reporting their Q4 numbers.

And we’ll hear a lot more from Kilar himself, who will be appearing at our D: Dive into Media conference at the end of this month. If you want to see him in person, grab a seat.

Per earlier reports, Dish Networks’s big rollout at the Consumer Electronics Show today is focused on “The Hopper,” a supersized video recorder that lets users store two terabytes of data. In English, that means about 250 hours of high-def shows, or 1,000 hours of regular shows.

There are a slew of other bells and whistles, and Dish had other stuff to announce, too, like an expanded deal with Time Warner’s HBO to offer more programming to Dish customers who also pay for the premium TV service, more programing for its Blockbuster movie service, and a broadband Internet via satellite option.

Oh, and a kangaroo, which did duty as both mascot and onstage prop.

But if you were looking for an “over the top” service that lets you get pay television over the Web without getting the standard pay TV bundles, this isn’t it. It’s possible that Dish CEO Joe Clayton will offer that one day, but it’s not here now.

The chief focus here is on the DVR, which doesn’t seem like it’s the kind of thing that will attract new customers, but might keep existing ones happier. Nothing wrong with that.

The most interesting wrinkle here is the Hopper feature that will let customers automatically record the primetime lineup of the four broadcast networks — News Corp.’s Fox, Disney’s ABC, Comcast’s NBC and CBS — and store the shows for up to eight days.

Anyone with a DVR is already able to record any show they want, and keep it as long as they have space, so this isn’t an earth-shifter. But it seems clearly designed to poke a bit at other playback options, like the video-on-demand offerings that many broadcasters offer for free, or the Hulu/Hulu Plus service co-owned by Disney, Comcast and News Corp. (News Corp. also owns this Web site).

All of those options, for instance, make you wait at least a day after a program airs before they let you see it. And the networks only offer some of their shows through those options (and CBS doesn’t work with Hulu at all).

My understanding is that Dish didn’t ask the broadcasters for permission on this one, and the way it’s constructed — broadcast-only, with a time limit, etc. — make me think it believes it has created something that doesn’t require a signoff, at least legally speaking. But since all of the big pay TV providers — Dish included — are signing “retrans” deals with the broadcasters and their owners, and those deals include restrictions on how the broadcast shows can be used, it seems like Dish would want to make sure its partners are okay with this.

And they might be! As a network executive pointed out to me this afternoon, this doesn’t have to be negative for the broadcasters. If Dish, for example, can get Nielsen to give the programmers full credit for the shows stored on the Hopper, then that’s a good thing — they’d rather get paid for that eyeball, for instance, than one they sell on the Web.

But it still seems like Dish is playing this one deliberately close to the line.

[Shutterstock/Anna Jurkovska]

We saw the first signs of that last year, when Clayton bought Blockbuster out of bankruptcy, then used the video company to create a kind of Netflix challenger. Tomorrow we should see the next steps, when the company rolls out a big announcement at the Consumer Electronics Show.

Here’s a good bet on what that will be: A new broadband Internet service, along with a super-sized DVR.

Trade pub Multichannel News has the details, gleaned from a report that went up briefly on Dealerscope, then went away, presumably because it violated a pre-briefing embargo. (Thanks to Jason Hirschhorn’s very useful Media Redfined feed for flagging.)

Since we never agreed to the embargo, happy to summarize here (not surprisingly, Dish declined to comment):

• The Internet service will be marketed to 8 million customers, most of whom can’t get fiber or cable broadband.
• The giant DVR will be called “The Hopper” and is designed to save and transmit shows in different parts of your house, and presumably outside of it, via Slingbox. You can see a teaser page for that one here, or look at the screenshot at the bottom of this post.
• There’s a cool feature that looks like it will automatically record the primetime lineups for the four broadcast networks (News Corp.’s Fox, Comcast’s NBC, Disney’s ABC and CBS).

All of which sounds interesting, and useful for existing Dish customers. But it doesn’t sound like Dish is ready to try a true “over the top” Web-based pay TV service that would rival traditional cable.

A lot of people think someone, or many people — could be Dish, could be Apple, could be Verizon, etc., etc., etc — is trying to line up one of those. But figuring out how to do that involves lots of deals with TV studios and programmers, and I don’t get the sense that anyone has those pacts yet. If Dish does, and announces it tomorrow, then it will truly be a press conference worth tuning into. If not, no worries — I’ll be watching anyway and will report back.

MORE CES NEWS:

• Complete coverage
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• Walt Shows Off CES Gadgets for Fox Business News (Video)
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• Fujitsu Seeking Way Into Crowded U.S. Smartphone Market
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• Microsoft Beefing Up CeBit Presence Even as It Pulls Back on CES
• Inside the CES Lost & Found
• FCC Chairman Has New Tablet, but Same Script: More Spectrum!
• Verizon Wireless: We Want to Connect Five Devices for Every Subscriber
• Ultrabooks From HP and Lenovo That Are (Kinda, Sorta) Different
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• Schmidt-Storm Alert: The Google Chairman Didn’t Like Your Question
• T-Mobile Expands Bobsled Messaging Service
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• Motorola CEO: We’re Going to Release Fewer Phones This Year
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• Exclusive: New Boss Acknowledges Windows Phone Still Has “Awareness Problem”
• And You Thought Jawbone UP Was Going to Miss the CES Party!
• Interview: T-Mobile CEO Says No Second AT&T Deal Out There
• Grover Is at CES and I Am Missing It
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• Why the Future of TV Won’t Be Here Soon
• Nvidia’s Tegra 3 Tries to Save Battery in All Sorts of Different Ways
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• Myspace — Yes, Myspace — Says It’s Going to Sell You Web TV
• Samsung Unveils “Super” 55-Inch OLED TV
• Nokia Unveils That LTE Windows Phone It’s Been Dying to Share
• Steve Ballmer Gives Ralph De La Vega a Very … Vigorous Greeting (Video)
• Interview: AT&T’s De La Vega on LTE, Tablets and Life After T-Mobile
• AT&T’s De La Vega: Shared Data Plans Still in the Works
• LG: 55-Inch Glasses-Free 3-D Screen Is on the Way
• LG Pushes 4G Smartphone Through Verizon: The LG Spectrum
• Live: AT&T’s Vegas Act Stars LTE and, Making Her Return to the Stage, Nokia
• CES Notebook: The Constant Search for Power and Vegas’ Worst-kept Secret
• Belkin Bringing Mobile TV to Lots of Cellphones, Will Anyone Tune In?
• Acer Introduces “World’s Thinnest” Ultrabook and a “Me-Too” Cloud Service
• There Better Be Some Cool Stuff at CES, Because CE Holiday Sales Data Bytes!
• CES 2012: Snooki and Bieber Are In, Gaga Is Out!
• Coming to a Smartphone Near You: Gorilla Glass 2
• RIM Hopes Next PlayBook OS Will Impress at CES
• Ultrabooks, the Ultra-Fancy New Name for Laptops
• At CES, Expect More Gadgets Telling You to Get Off the Couch
• Intel to Detail Its Phone Plans at CES Next Month
• Microsoft Pulling Out of CES After Upcoming Show
• Intel to Detail Its Phone Plans at CES Next Month
• Dell Will Drop the Flashy Vegas Act for CES This Year
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[Shutterstock/Marko Cerovac]

The deal will also give Comcast customers more ways to watch those shows, including the ability to stream some of the programs live, on the go, on laptops, iPhones and iPads.

I’ve published the full press release below, but here are some of the quick takeaways:

THE WALT DISNEY COMPANY AND COMCAST CORPORATION ANNOUNCE A LONG-TERM, COMPREHENSIVE DISTRIBUTION AGREEMENT THAT ADVANCES THE SUCCESSFUL MULTICHANNEL BUSINESS MODEL

DEAL PROVIDES XFINITY TV CUSTOMERS BROAD ACCESS TO TOP SPORTS, NEWS AND ENTERTAINMENT CONTENT ACROSS MULTIPLE SCREENS IN AND OUT OF THE HOME

PHILADELPHIA AND BURBANK –– JANUARY 4, 2012 –– Comcast Corporation (Nasdaq: CMCSA, CMCSK) and The Walt Disney Company (NYSE: DIS) today announced a long-term, comprehensive distribution agreement that will deliver Disney’s top quality sports, news and entertainment content to Comcast’s Xfinity TV customers into the next decade on television, online, on tablets and handheld devices. The new agreement enhances the multichannel business model and supports the companies’ mutual goal to deliver the best video content to customers across multiple platforms using the latest technology and cloud innovation. For the first time ever, Comcast’s Xfinity TV customers will be able to watch ESPN, ABC or Disney shows live or on demand and across multiple screens. The companies also agreed to collaborate over the term of the deal to create new, innovative viewing experiences for Xfinity TV customers.

The networks and services covered by the agreement include: ABC, ABC Family, Disney Channel, Disney XD, ESPN, ESPN2, ESPNU, ESPN Deportes, ESPNEWS, ESPN Classic, ESPN Goal Line, ESPN Buzzer Beater, ESPN 3D, ESPN GamePlan, ESPN FullCourt and ESPN3; retransmission consent for seven ABC-owned broadcast television stations (WABC-TV New York, WLS-TV Chicago, WPVI-TV Philadelphia, KGO-TV San Francisco, KTRK-TV Houston, KTVD-TV Raleigh-Durham, and KFSN-TV Fresno) as well as more than 10 high-definition networks. Additionally, Comcast will launch Disney Junior, a new 24-hour basic channel for preschool-age children, parents and caregivers. Comcast will also provide its Xfinity TV customers with broad access to a suite of live Disney networks on an authenticated basis and expanded Xfinity On Demand content through Disney’s comprehensive TV+ initiative. In total, 70 services are covered by the broad scope of this new agreement. License fee schedules for different services under the deal will be phased in over time.

“Comcast was the first video provider to create technology that enabled us to deliver content to customers where and when they want it across any viewing experience,” said Neil Smit, President and Chief Executive Officer, Comcast Cable. “We are very pleased to have reached this unprecedented and innovative, long-term agreement with Disney which embraces the future of entertainment and allows Comcast to continue to bring our vision of TV Everywhere to Xfinity customers whether at home or on the go.”

Anne Sweeney, Co-Chairman, Disney Media Networks and President, Disney/ABC Television Group, added, “This landmark deal is a great example of what can be achieved when programmers and distributors collaborate and innovate together to meet the ever-evolving needs of consumers and enhance the viewing experience. By combining the best news, sports and entertainment content available today with cutting-edge technologies, we’re able to fully realize our comprehensive TV+ initiative, and introduce a brand new suite of authenticated services to Comcast subscribers.”

Added George Bodenheimer, Executive Chairman, ESPN, Inc., “Given the scope of assets Comcast and Disney/ABC/ESPN are making available to consumers, this agreement is unprecedented in our industry. It reinforces the value of the multichannel subscription and takes full advantage of new technologies, which serve all of our viewers.”

The extensive and expanded rights package for Comcast’s Xfinity TV customers includes rights across multiple platforms for:

· Comcast’s Xfinity TV customers will receive more ABC, ABC Family, Disney and ESPN content through their set-top-box and, at this time, Disney and ESPN content online, including:

o ABC On Demand, ABC’s fast-forward-disabled On Demand service, which currently features a selection of top-rated primetime entertainment programming, including episodes of such popular current ABC shows as “Castle,” “Grey’s Anatomy,” “Once Upon A Time,” “Private Practice” and “Revenge.” Full current seasons will be made available on a number of shows. Additionally, Xfinity TV customers will have access to a variety of ABC News programming as well as some local ABC owned-station content.

o ABC Family On Demand, which features a variety of top-rated full episodes, refreshed monthly, from such popular millennial favorites as “The Secret Life of the American Teenager,” “Switched at Birth,” and “Melissa & Joey.” Full current seasons will be made available on a number of shows. ABC Family original movies like “12 Dates of Christmas” will also be available.
o Disney-branded On Demand offerings, including Disney Channel On Demand, Disney Junior On Demand, and Disney XD On Demand. Refreshed each month, the Disney Channel On Demand offering will include episodes from such series as “Handy Manny,” “Mickey Mouse Clubhouse,” and “Jake and the Never Land Pirates” for preschoolers, as well as variety of episodes from “A.N.T. Farm,” “Good Luck Charlie,” “Wizards of Waverly Place,” and other popular series for older kids. Select episodes featured on Disney Channel On Demand will be available in innovative new offerings, such as playlists and monthly programming blocks, in addition to a number of episodes available in multiple languages. Disney Channel Original Movies such as “Lemonade Mouth,” “Geek Charming” and “Phineas and Ferb: Across the Second Dimension” will also be available. Disney XD On Demand features a variety of episodes from such series as the Emmy Award-winning animated hit “Phineas and Ferb.”
o Disney Channel’s subscription Video On Demand service, which offers on demand access to select episodes before they air, will now be available to Xfinity TV customers who receive Disney Channel, a service that Comcast will offer to these customers for no additional fee.
o Expanded on demand content from ESPN, including content from ESPN Deportes and ESPN’s award-winning original content from ESPN Films.
o The subscription On Demand service “Disney Family Movies,” which features a selection of classic and contemporary feature films and animated shorts from The Walt Disney Studios.
Xfinity TV customers will receive broad access to existing authenticated products like WatchESPN, as well as upcoming authenticated products, including WatchDisneyChannel, WatchDisneyXD and WatchDisneyJunior. These services will give Comcast’s Xfinity TV customers more opportunities to access live and video on demand content, both in-home and out-of-home, on their computers, smartphones, tablets and gaming consoles.
Xfinity TV customers will also receive the recently announced Disney Junior, a new 24-hour basic channel for children ages 2-7, parents and caregivers. Upon its debut in 2012, the new channel will feature animated and live action programming that blends Disney’s unparalleled storytelling and beloved characters with learning, including early math, language skills, healthy eating and lifestyles, and social skills.
Comcast also obtained rights to air certain content from ESPN3, ESPN FullCourt and ESPN GamePlan on Comcast’s Xfinity Sports Entertainment Package.

If you’re reading this site, you know who all of these folks are. But just for formality’s sake:

Jason Kilar is CEO of Hulu, the video joint venture co-owned by Comcast, Disney and News Corp.’s broadcast TV units. The site has been a huge hit with viewers and subscribers, who have put it on pace to generate $500 million in revenue this year. But its owners aren’t quite sure what to do with it: They put it up for sale this summer, then decided to hang on to it after all. This will be Kilar’s first major public appearance since that tumult, so we’ll have plenty of questions.

Dick Costolo is CEO of Twitter, which has moved from Web oddity to a service used by more than 100 million people a month. Twitter’s founders didn’t like the notion of turning their baby into a media company, but that’s exactly what Costolo is trying to do now; he is ramping up efforts to attract more eyeballs and sell more ads. And he’s leaning heavily on big media companies — especially TV networks and movie distributors — to make that happen.

Martha Stewart is the founder of Martha Stewart Living, the multimedia empire she built from scratch, which now includes magazines, TV shows, a Web site and multiple lines of branded goods; her newest coup is a big-dollar deal with J.C. Penney. She’ll be joined onstage by Lisa Gersh, the president and chief operating officer Stewart brought in from NBC Universal nearly a year ago. At NBC U, Gersh had overseen the acquisition of the Weather Channel, among other duties; she had previously been chief operating officer at Oxygen Media.

They’ll join a lineup that includes ESPN President John Skipper, YouTube CEO Salar Kamangar, Viacom CEO Philippe Dauman, New Yorker editor David Remnick, Warner Music Chairman Edgar Bronfman Jr., News Corp. Chief Operating Officer Chase Carey, Clear Channel CEO Bob Pittman, Legendary Pictures head Thomas Tull and Vevo CEO Rio Caraeff. And we may still have a surprise or two between now and the end of January.

All Things Digital’s first-ever media conference runs Jan. 30 and 31 at the Ritz-Carlton in Laguna Niguel, an hour south of Los Angeles. See you there.

The comedian has kicked off a press tour, starting with a weird and dizzying Q&A with Reddit yesterday, followed by a “Nightline” segment last night. This one lasts six minutes, has a minute-long pre-roll, and is the standard introduction-of-semifamous-person-to-TV-mass-audience that shows like “Nightline” specialize in. (Look! Here he is with a MacBook!) Nothing wrong with that.

The study, by ad-buying firm Optimedia US, one of the first to examine the issue, raises questions about the effectiveness of social media as a promotional tool for TV.

It found that the top five new shows in terms of online buzz — Fox’s talent show “X-Factor,” the NBC drama “Playboy Club,” the Fox comedy “New Girl,” the NBC comedy “Whitney” and the ABC action show “Charlie’s Angels” — didn’t rank nearly as high in terms of viewership.

Read the rest of this post on the original site »

YouTube is trying to change some of that with its “channels” strategy, but Jeff Kwatinetz has his own plan for a middle route: The Hollywood producer is trying to make new episodes of shows that used to be on TV, and show them on the Web.

Kwatinetz and his Prospect Park production firm want to take two long-running ABC soap operas — “All My Children,” which went off the air in September, and “One Life to Live,” which will end in January —  and start making new episodes that should look and sound exactly like the originals. Except you’ll need a broadband connection to watch them.

If you’re one of the people who thinks many folks no longer make a distinction between stuff they watch on TV and stuff they watch on the Web, this will make perfect sense. But Kwatinetz has yet to win over enough financial backers, which is why he’s now talking to people like me, hoping we’ll help him make his case.

I don’t have a dog in this fight, except that I do think it’s an interesting idea. And I’m quite sure that someone will take a stab at it soon.

Netflix, for instance, has noodled around with the notion, and may end up trying the same strategy with “Arrested Development,” a former Fox comedy beloved by a relatively small group of fans.

So let’s quickly run through Kwatinetz’s pitch:

Cost: An average hour of one of his soaps currently costs ABC around $160,000 to make, which is outrageously cheap for TV and fantastically expensive for the Web. But Kwatinetz says he’s not going to be able to save much money when he moves the shows online — he’ll still be paying the same writers, actors and production staff. Overall, he figures he’ll need around $80 million to produce both shows for a year, and $65 million in hand to start up production.

Audience: Both shows averaged around 2.5 million viewers an episode on ABC this year. But Kwatinetz thinks he can make a profit if he can just bring 10 percent of those eyeballs to the Web. That doesn’t seem outrageous, given the commitment that some soap viewers make to their shows.

And in case you were wondering — yes, people who watch soap operas watch online video, too. Here’s a chart from a research deck Kwatinetz and his partner Rich Frank use in their pitch. It’s data from research firm Frank N. Magid Associates, which shows that about half of soap viewers (and ABC soap viewers in particular) are likely to watch Web video:

Revenue: This is the part that requires the biggest leap of faith. Kwatinetz figures that if Web TV portals like Hulu can command $40 CPMs for their stuff, he can, too. Particularly because his episodes will be new, not reruns that aired days earlier. He also figures he can resell the shows to traditional cable down the road, and/or sell them via distributors like Apple’s iTunes.

But there’s a reason that no one is making video with TV-level budgets for the Web yet, and that’s because ad buyers aren’t paying up consistently for it. YouTube’s new plan, for instance, assumes that its channel partners will spend considerably less than $100,000 per hour to make their stuff for the site. And the stuff that runs on Hulu isn’t dependent on that advertising revenue — it’s built with TV ad dollars in mind.

Compared to some pitches we’ve seen win funding in the last couple years, this one seems almost conservative. But Kwatinetz still doesn’t have all of the cash he needs to go forward.

“A lot of the investor pool that we go to are people with Hollywood backgrounds,” he says. “And while we feel that it’s obvious that convergence is here, we’ve met with an unusual amount of skepticism. So now we’re going out to Silicon Valley, and they seem to get it.”

Kwatinetz would like to have his shows up and running as soon as “One Life to Live” ends in mid-January, but unless he starts very soon, it will be hard to hit that deadline. For the record, here’s the rest of the Magid research, which won’t surprise people who read this site. But apparently it’s still an eye-opener for some.

Magid Daytime Soap Pres PP 100611 Rev

Disney has re-upped a two-year-old deal with Netflix to stream older shows that aired on ABC, ABC Family and the Disney Channel. And it announced what is essentially the same deal with Amazon, which will make the shows available via its Amazon Prime streaming service.

The Amazon deal also includes animated shows featuring Marvel characters, and it’s possible that the two deals have minor differences. The Netflix release, for instance, says that some shows that are still on the air — like “Grey’s Anatomy” — will be available 30 days after the last episode of each season runs on TV. There’s no reference to window length with Amazon.

But for the average Web video viewer, this stuff is going to mean the same thing: Both Amazon and Netflix are going to have a bunch of old ABC shows. A few of them will be programs that are still running on TV, but they’ll be from previous seasons, not this year’s reruns. And everything else will be even older.

That’s now the standard for most Big TV Web-video licensing deals. The networks and studios are quite happy to sell their shows to digital distributors, as long as they’re a bit musty.

It’s basically found money, and it will drop straight to Disney’s bottom line, just like equivalent deals at Comcast’s NBC, News Corp.’s Fox, etc. (News Corp. also owns this Web site).

And the networks are finding ways to sell the same stuff multiple times, like today’s pacts, or deals announced earlier this month to show CW Network shows on Netflix and Hulu, which (could) bring more than a $1 billion in new revenue to owners CBS and Time Warner.

The deals also show that Amazon continues to cut into the lead Netflix has built up in its Web video catalog. Netflix is moving toward an exclusivity strategy, where it pays a premium for stuff you’re not going to be find anywhere else on the Web. But it can’t fill its 20,000-title catalog with exclusives alone. And in this deal, at least, it doesn’t appear to have carved out any exclusives at all.

HULU EQUITY OWNERS ANNOUNCE DECISION TO TERMINATE THE HULU SALE PROCESS

Los Angeles, New York & Providence, RI – October 13, 2011 – The following is a joint statement from Hulu owners News Corporation, Providence Equity Partners, The Walt Disney Company and the Hulu senior management team:
“Since Hulu holds a unique and compelling strategic value to each of its owners, we have terminated the sale process and look forward to working together to continue mapping out its path to even greater success. Our focus now rests solely on ensuring that our efforts as owners contribute in a meaningful way to the exciting future that lies ahead for Hulu.”

So that ends one chapter of the odd Hulu story. Not a shocking end, because it has never been clear that Hulu’s owners — who include Comcast, Disney and News Corp., which also owns this site — actually did want to hand it off to someone else.

I can save myself some work by quoting from the piece I wrote back in June, when the sale process kicked off, sparked by an overture from Yahoo:

… while it’s natural to think about who might be interested in buying Hulu, it’s the wrong question. The right one: What are Hulu’s owners selling?

More specifically, what kind of content licenses are Hulu’s three broadcast owners — News Corp.’s Fox, Disney’s ABC, and Comcast’s NBC — willing to part with?

Because it’s the TV shows from those three companies that give Hulu almost all of its value. And while those shows have helped Hulu build a big Web business very quickly — Hulu has said it’s on track to generate $500 million in revenue this year — that’s not nearly as important to Hulu’s owners as their core TV business.

That fundamental tension is what led to Hulu CEO Jason Kilar’s Web outburst in February this year, and it’s what has underscored the networks’ recent renegotiations of their distribution deals with the site.

And all of that has been going on while the networks own big equity stakes. If they sell that, then those tensions only increase. Or, put another way: They’ve got even less incentive to make Hulu work. …

So once again we’ve got diverging interests at Hulu. But if push comes to shove, I’m betting on the guys who own the content. And I wouldn’t be surprised if they don’t end up selling a thing.

Next up: Now that Hulu’s owners are keeping the site, what will they do with it — and who will run it? Jason Kilar is still CEO, but prior to this summer’s auction he’d spent months butting heads with his owners, who don’t see eye to eye with him on many things. My gut is they’ll offer him a significant incentive package to stay, but that it won’t be enough.

Its parent company, IAC/InterActiveCorp., is launching a new comedy site, Jest.com, that aims to broaden CollegeHumor’s humor to appeal to 18- to 49-year-olds.

The Jest site will feature some original Web video produced by Jest, which will be added every other day or so. The bulk of it will be tens of thousands of funny videos — including episodes of TV shows like ABC’s “Modern Family” — aggregated from across the Web through partnerships with sites like Hulu LLC and Google Inc.’s YouTube.

Typical of Jest’s humor is an original video about a room at furniture store Ikea where bickering couples can go to break-up, a riff on how stressful furniture shopping can be for couples. The site went live Sunday.

Read the rest of this post on the original site »

If you’re reading this — or if you work at Twitter — then you probably know who the Honey Badger is. And if not, you’re probably okay with not knowing, because you understand that you can suss this out with a simple search.

But what if you’re just watching “Dancing With The Stars” next Tuesday and you see this thing? Then perhaps you’ll be a little … baffled.

See: Honey Badger is a big viral hit on YouTube, where he has generated more than 18 million views since January. But “Dancing With the Stars” is a genuinely big television show, which means it gets 15 million viewers a week. And my hunch is that a lot of the folks tuning in will have never seen the Badger before or heard his friend Randall extoll his virtues.

By the way, if you’re in that group, I can solve that problem for you here. There is some flamboyant swearing and also some animal-on-animal violence, which is kind of the appeal of the whole thing. But perhaps it might be a problem in your office.

The shows are available via Prime Instant, the on-demand video service that’s free to anyone who pays $79 a year for the Amazon Prime shipping service. But with Amazon set to unveil a new iPad-like tablet on Wednesday, lots of folks assume that the company’s video offering will be tied to the new gadget as well.

Like other programming deals Amazon has signed with the likes of CBS and NBCUniversal, the Fox pact is for library shows the network no longer airs. Deals for “in-season” shows are exceptionally rare, and generally the only (legal) place you can find them online are on the networks’ own sites, as well as Hulu.

Amazon says the Fox deal brings its streaming library up to 11,000 titles; Netflix offers around 20,000. (Disclosure: News Corp. owns Fox, as well as this site).

UPDATE: An Amazon press release says the deal includes old Fox movies as well, like “Office Space,” “Speed” and “Butch Cassidy and the Sundance Kid.”

Apple has completely removed customers’ ability to rent shows from iTunes; the remaining options are to buy individual episodes or in some cases a “Season Pass” for a year’s worth of shows.

This doesn’t come as a huge shock, as by all accounts few customers have been interested in rentals, even after ABC and Fox dropped the prices on some of their episodes from $1.99 to 99 cents nearly a year ago.

And Apple has recently given customers the ability to watch shows they purchased via iTunes any time they want, on any Apple device, by streaming it from its “iTunes in the Cloud” service.

“iTunes customers have shown they overwhelmingly prefer buying TV shows,” Apple spokesman Tom Neumayr said. “iTunes in the Cloud lets customers download and watch their past TV purchases from their iOS devices, Apple TV, Mac or PC allowing them to enjoy their programming whenever and however they choose.”

A statement from Fox (which like this Web site is owned by News Corp.) suggests that the studio was no longer interested in rentals, either: “After carefully considering the results of the rental trial, it became clear that content ownership is a more attractive long-term value proposition both for iTunes customers and for our business. To further enhance the value of ownership, we are working with Apple to make content available within their new cloud-based service.”

If customers have proven resistant to the idea of rentals instead of purchases, the TV networks and studios have always taken that stance.

Former Apple CEO Steve Jobs and his lieutenants worked hard throughout 2010 to get studios on board with the idea of cutting their rental prices to spur more transactions. But in the end Apple was only able to get two major partners to sign up: Disney, where Jobs is on the board of directors and is the company’s largest individual shareholder, and News Corp., which at the time was working closely with Apple to launch The Daily iPad newspaper.

But Jobs had insisted that pricing was the key to increasing content consumption, and that if his partners would charge less, he could help them sell a whole lot more. “Price it aggressively and go for volume,” he said in an onstage interview at the D: All Things Digital conference in June 2010.

Right now the TV business seems to be going the other way. Here’s what your options looked like yesterday if you wanted to pay for an episode of last season’s “Simpsons” on iTunes:

And here’s what it looks like today:

The big media companies have all failed when it comes to digital … Hulu is the exception to that rule. It has flourished, despite ownership by the major media companies. Yet, this is the business that the media companies are looking to sell — does that make sense?

BTIG analyst Rich Greenfield, in a note urging Hulu’s owners, who have put the site on the auction block, not to go through with the sale

Yesterday Fox followed through with its previously announced plans to keep its new shows off the Web for eight days, except for Hulu Plus and Dish Network subscribers. (Fox is owned by News Corp., as is this Web site.) Disney’s ABC is now set to do the same thing, according to people familiar with the company’s plans.

Disney hasn’t formally commented on its plans for “authentication” for ABC broadcast shows on ABC.com and Hulu, but CEO Bob Iger pretty much spelled it out last week during his company’s earnings call.

Asked repeatedly about his Web and digital video strategy, Iger said he was all for distributing his stuff via nontraditional outlets like Hulu and Netflix — as long as it didn’t disrupt his existing relationships with the cable guys who are paying him big money for his shows. And that’s the main point of authentication — keep the cable guys happy.

Some Iger quotes from his call, via Seeking Alpha:

“The relationship that we have with the distributors is a very valuable one, and it’s one that we aim to respect by both protecting what we currently have and determining or figuring out ways that we can expand on it.”

“Our overall approach of late has been to make deals that increase revenue, while at the same time, protect and respect basically the multichannel or the channel distribution value that we see today. So, we’re looking at deals that are largely library in nature, meaning very little if any content that would be in season, mostly prior season. But also, trying to build into at least some of these deals, some form of authentication, [that] … will allow access to our programming faster or in a more aggressive window, if the customer is a multichannel subscriber.”

“You are right in your assessment that we’ll basically push the window back or make access to the programming more difficult or later, except if customers are authenticated as a subscriber.”

You won’t hear much carping about the pullback yet, but that’s because there’s barely any new programming going up in August. Right now, this only affects folks who want to catch up on “Hell’s Kitchen” and “MasterChef” (Team Adrien!). You’ll hear plenty more griping once the new fall shows go up next month.

On the other hand, this is good news for “Modern Family” creator Steve Levitan, who is going to get his wish.

Prior to today, I kept hearing chatter, none of it stronger than word-of-mouth gossip, that Google really did want to make a run at the video site. That struck me as a stretch, given that Google was already facing a wide-ranging federal antitrust probe, and that adding the video site that dominated the market for “professional” content would be a giant red flag for regulators.

Now it seems like a really, really long stretch.

Google could easily afford to shell out a couple billion for the site, owned by a consortium that includes Disney, Comcast and News Corp. (News Corp. also owns this Web site).

At the end of June, Google had $39 billion lying around, and it makes a couple billion more in profits each quarter. And Google biz dev boss David Drummond made a point of telling investors this morning that the $12.5 billion Google wants to spend on Motorola won’t slow it from making other deals.

But Motorola makes Hulu that much more unlikely for two big reasons:

• Google could certainly argue that it wouldn’t break antitrust rules with a Hulu deal for a lot of reasons. They could note, for instance, that Hulu doesn’t have truly exclusive rights to its programming, but shares the licenses with content owners who show the stuff on their own sites (i.e. Fox.com, NBC.com, etc.). But TV is different from mobile advertising or flight search software — people have an emotional attachment to it, and regulators respond accordingly. Note that Comcast had to abdicate any control of NBC Universal’s Hulu stake as a condition to getting its merger done. It’s that much harder to imagine Washington giving Google the go-ahead to control the online output of three of the four broadcast networks at the same time it is asking for control of a giant handset-maker.
• Even if Google thought it could get the deal done, it would have to convince Hulu’s owners, too. Google says it thinks it can get Motorola approved by Washington by the end of the year, but that seems crazily optimistic — as Citigroup’s Mark Mahaney notes, both ITA and DoubleClick took 9 to 11 months for sign-off. If you’re Disney/News Corp./et al and you decide you do want to sell, you want to find a buyer who can actually make it happen.

Then again, perhaps Google could offer a 63 percent premium and a gazillion-dollar break-up fee as insurance, just like it did with Motorola today, and Hulu’s owners would be willing to take the non-risk. Goohulu may have a very, very low chance of survival, but I can’t call it DOA just yet.

Except for the part about it not working.

On Aug. 15, Fox will stop distributing its shows on Hulu and Fox.com a day after they air, and will make most Web surfers wait eight days to see them. The only legal way around this, for now, is to pay for a subscription to either the Dish Network or Hulu Plus.

Expect ABC to follow suit, and then NBC. CBS is a reasonable bet, too.

I walked through the networks’ rationale for this last month, when word first got out that Hulu’s broadcast owners — Disney, Comcast and News Corp. — were going to start requiring “authentication” in order to watch shows online the next day. You can read an excerpt at the bottom of the post if you don’t want to click through.

The problem with the networks’ logic: Sidereel.com. And Sceper.eu. And Twitter. And Google. Etc.

All those sites will lead you, quite quickly, to anything the networks air, for free, on the Web. And you don’t have to wait eight days to watch them, or even a single day. You can see them within hours, or less, of their original airtime.

Video piracy is nothing new, of course. But if you haven’t tried watching a TV show from a rogue site recently (and I’m not advocating you do so for any reason other than a professional one — I don’t want a “Wolverine” incident) you might be astonished to see just how fast, and easy, it’s become.

As BTIG analyst Rich Greenfield pointed out to Wall Street earlier this year, it’s now a cinch to download pirated copies of any movie you’d like, in very high quality, using free online storage lockers.

But it’s equally easy to grab TV shows, and you don’t have to worry about downloads if you don’t want to clog up your hard drive: Sites like Videobb.com will offer free streams, without commercials, the same night they air on TV.

Here’s a screenshot of last night’s episode of “MasterChef,” available a couple hours after it aired on Fox (which, like this site, is owned by News Corp.).

And here’s a grab of Tuesday night’s “The Daily Show,” which I was able to watch less than 30 minutes after it finished airing on Comedy Central.

Downsides? Sure. The streams aren’t HD quality — if you got it onto your 42-inch LCD, you’d be disappointed. And the sites seem to require Flash, so they won’t work on an iPhone or iPad. And you may still need a bit of trial and error to get a working version.

And they’re illegal, of course.

But again: They are free, totally serviceable, and very easy to find for anyone who’s remotely motivated.

That was the case before the Great Free TV Web Pullback of 2011, too. But back then (as in, now) if you were a middle-of-the-road TV and Web video fan, it was easy enough to head over to Hulu to watch last night’s “MasterChef.” You’d even put up with commercials.

Now Fox, and very likely the rest of the broadcast TV business, are telling non-pirates to go ahead and grab what they like, when they like. I think they’re going to find lots of takers.

—–

So why do the networks think this is a good idea? They probably don’t. But it’s a way to prop the business up in the short term, at the expense of the long run.

From my June 23 piece:

Why would Hulu’s owners push to make the service less attractive? The justification I’ve heard is that most Hulu viewers are paying for TV anyway, so this really wouldn’t be a big deal.

But the real answer is that this is meant to appease cable TV providers who are paying Hulu’s owners — via “retrans” deals — for the rights to provide the shows that Hulu is giving away on the Web. And it’s also meant to protect the value of broadcast TV advertising, since the ad business still doesn’t value a Web eyeball as much as one that watches on a TV.

Again, this is the kind of tension between business models that has been a problem for Hulu almost from the get-go. And it has been the source of many of the disagreements between Hulu CEO Jason Kilar and his owners for some time.

Hulu’s owner/partners — Disney’s ABC and News Corp.’s Fox — have finished their deals extending their content licenses, which have been in the works for a while. As PaidContent noted last week, those deals will stay intact if Hulu is sold. (Hulu’s third owner/partner, Comcast/NBCU, doesn’t have a management role in the company, and has to follow its two partners. So it’s in, too.) That boosts Hulu’s sale value.

The network’s content deals are exclusive, more or less.  It’s theoretically possible for the broadcasters to show their stuff on other online outlets, but they’ve determined that they’ll get the best bang for their buck at Hulu. “We don’t intend to have these shows available anywhere else,” says an executive at a Hulu owner. (Hulu’s three partners continue to have the rights to put their shows up on their own corporate-owned sites.) That’s a big plus for a prospective buyer.

Hulu’s owners do plan to increase the amount of time it takes for a TV show to move from broadcast to the Web site. Right now, almost all broadcast shows end up on Hulu.com the day after they air. But as the Los Angeles Times reported last week, Hulu’s broadcast owners plan to push that window back as much as eight days unless viewers can prove they are cable or satellite TV subscribers. Sources familiar with the site tell me this “authentication” plan won’t kick in right away — for one thing, the systems needed to implement it aren’t built yet. But the fact that it’s in the works could diminish Hulu’s value, since it will limit viewership.

Hulu CEO Jason Kilar might be very happy to see a sale. Kilar’s relationship with his broadcast owners has been strained, and his employment contract is up next month, leading to lots of speculation that he was out the door. A new owner with deep pockets willing to fund more rights deals like Hulu’s Viacom pact might help keep him engaged, though. Another upside to the sale: A chance to cash out the equity stakes Kilar and his employees hold.

Providence Equity Partners, which put up $100 million to seed the company in 2007, has a put option that kicks in during 2012. That could force the broadcast owners to hand over a chunk of cash if the company hasn’t already sold or gone public by then. But people familiar with the company tell me that the option isn’t driving sales talks, and that News Corp. and Disney are willing to make the payments if necessary. (News Corp. also owns this Web site.)

So that helps clear things up, just a bit. We might hear more about other known unknowns — like, when do the new content deals expire? — as Hulu begins opening the kimono for potential buyers over the next few weeks. Ditto for the list of potential buyers, which begins with Yahoo and Microsoft, but extends to just about anyone who can rustle up at least a couple billion dollars.

Also bear in mind that some of the terms discussed above can change if someone shows up with a truly preposterous amount of money. One executive familiar with the company notes the parable of Netflix, where CEO Reed Hastings couldn’t get Hollywood studios to deal with him, until one day they did, because he was able to write significant checks.

And while it’s natural to think about who might be interested in buying Hulu, it’s the wrong question. The right one: What are Hulu’s owners selling?

More specifically, what kind of content licenses are Hulu’s three broadcast owners — News Corp.’s Fox*, Disney’s ABC, and Comcast’s NBC — willing to part with?

Because it’s the TV shows from those three companies that give Hulu almost all of its value. And while those shows have helped Hulu build a big Web business very quickly — Hulu has said it’s on track to generate $500 million in revenue this year – that’s not nearly as important to Hulu’s owners as their core TV business.

That fundamental tension is what led to Hulu CEO Jason Kilar’s Web outburst in February this year, and it’s what has underscored the networks’ recent renegotiations of their distribution deals with the site.

And all of that has been going on while the networks own big equity stakes. If they sell that, then those tensions only increase. Or, put another way: They’ve got even less incentive to make Hulu work.

Remember that we’ve been down this road before. Last year, Hulu and Morgan Stanley floated the notion of an IPO, which went nowhere because the company couldn’t secure long-term exclusive content licenses from its owners.

Since then its owners seem even less likely to make that kind of deal, because the list of potential customers for that stuff keeps getting bigger: Netflix, Apple, Amazon, the Dish Network, Yahoo, etc. Why lock all of them out?

That said, that same list of customers are all potential Hulu buyers, depending on the content they’d get and the price they’d have to pay. And Providence Equity Partners, which helped bankroll the joint venture with a $100 million investment back in 2007, would be happy to see a sale.

Ditto for Kilar and his top managers, who have equity stakes but haven’t had the liquidity that employees at Twitter, Facebook, Groupon and other big-name start-ups have enjoyed.

So once again we’ve got diverging interests at Hulu. But if push comes to shove, I’m betting on the guys who own the content. And I wouldn’t be surprised if they don’t end up selling a thing.

*News Corp. also owns this Web site.

Here’s the old version of the Hulu Plus subscription app for the iPad:

And here’s the new version, built to comply with Apple edicts that kick in at the end of the month:

Easy, right? All Hulu had to do was strip out the link that sent potential subscribers to its Web site, because Apple’s new rule will ban “apps that link to external mechanisms for purchases or subscriptions to be used in the app.”

That means that the app can no longer function as an effective advertising tool for the video service, which is a bummer for Hulu (which is owned by Comcast’s NBC, Disney’s ABC and News Corp.’s Fox; News Corp. also owns this Web site). It’d be quite useful to offer a smattering of free content on the app, then encourage users who want more stuff to click through to Hulu.com to pony up $8 a month.

But that’s much better than the previous choice Apple offered app developers that wanted to sell access to content: Use Apple’s in-house purchase system — and give Apple 30 percent of all sales that flow from that — or don’t do it at all.

Lots of developers have no problem using Apple’s system, which gives them access to a customer base of 225 million people. But others won’t want to give up that much revenue.

So now we’ll see how other content companies that currently use external links in their apps decide to play it over the next couple weeks.

My hunch is that digital video and music companies like Netflix and Rhapsody will follow Hulu’s lead and drop their “buy” buttons. The New York Times has already said it would work with Apple’s rules, but that was back when it announced its paywall/subscription plan in March, when it had a different set of options. I asked Times officials about their plans 10 days ago, and they declined to comment.

Also not commenting: The Wall Street Journal — which again, like this Web site, is owned by News Corp. The Journal hasn’t said a peep about its Apple subscription plans, which seems a bit odd, given that News Corp. and Apple rolled out the first iteration of Apple’s subscription offering, via The Daily, back in February.

Rival business daily the Financial Times, meanwhile, has quite clearly signaled what it plans to do: It has built an HTML5 Web app so it can control every part of the subscription process itself.

Then there’s Amazon, which seems to be one of the clear targets of Apple’s revised rules – note that they specifically rule out the use of a “buy” button that goes to a Web site to purchase a digital book. Hard to believe that Amazon will get rid of its Kindle iOS apps altogether, since they’re a key feature of the Kindle ecosystem. But dropping the app’s “buy” button will be a real drag for the bookseller, too.