Hulu For Your Bandwidth

November 14, 2008

(4 votes, average: 5 out of 5)

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As a telecom guy, I’m fascinated by the phenomenal growth of online video services like YouTube, iTunes, and Hulu. Multiple services have grabbed the attention of the consumer, media, and advertisers alike with the potential of video entertainment on demand. Watch exactly what you want, when you want, on your terms. But, for me, it is all about bandwidth - how much will be required by each individual consumer to adequately stream high definition video, and how will the service providers deliver such huge quantities of unlimited internet to make it all possible! Of course, the bandwidth won’t matter if the video services don’t figure out a working revenue model to keep the lights on and all those billions of little packets of data flowing to your laptop.

For years, Google’s YouTube has been building a base of loyal viewers. However, nearly all of the content on YouTube is amateur video of low resolution and inconsistent quality. For the most part, Google hasn’t really tried to make money off of YouTube. However, YouTube is part of a publicly traded company and will need to eventually pull its own weight to keep investors happy. As a result, YouTube will begin displaying an increasing number of Ads on the site and has just begun branching out into the streaming of movies and TV shows as well as the user created content that it is currently so well known for.

Hulu, while similar to YouTube in that it provides video over the Internet, has recently been gathering steam and attention due to its exceptional inventory of professional TV shows and other premium content which it provides to users free of charge. The business model, like YouTube, is fueled by advertising. While not as viral or well known as YouTube, Hulu has the quality content advantage and that is likely to result in higher advertising dollars as video over the web increases in popularity. Hulu was started by NBC and News Corp in 2007 but currently features content from over 100 different content providers. Hulu has struck popularity (if not gold) by streaming episodes of Family Guy and the Daily Show with Jon Stewart.

However, this isn’t a race between just YouTube and Hulu. There are many other players looking for their share of your eyes as well. Chief among these is Apple. Apple’s iTunes store now sells and “Rents” movies and TV shows for users of its iPods, iPhones, Macs, and Apple TV. Apple’s huge inventory of Movies, TV shows, Music, Podcasts, and Audio Books make it the top dog in the online content delivery world. And Apple has neatly avoided the advertising trap by charging consumers directly. While this has worked like a lucky charm for Apple’s bottom line thus far, it remains to be seen if iTunes will take a hit in the future as “free” sites like Hulu and YouTube begin to offer more and better content.

The battle over online video goes much deeper than just grabbing your attention. There are dollars a stake. Those who bring in the dollars are able to capture the best content providers and keep their services online. Because Apple charges users per item downloaded, Apple can afford to pay a share of the wealth with the content producers. Hulu and YouTube may not be able to guarantee a reliable revenue stream at this point from Advertising dollars, but hope to create a whole new Advertising industry for online video dollars in the near future. But due to ever increasing bandwidth requirements and a push for high def web video, that is going to be a pretty tall order. At the end of the day, there is still a bill to be paid for a huge amount of bandwidth, as well as for content and operations.

It is unlikely that YouTube will be allowed to fail by its monster of a mother, nor is iTunes likely to suddenly wither and die on the vine. Hulu and a myriad of others are the wild cards. Any of them could take off like a rocket, or be crushed by the current credit crisis and mounting debt. The industry is young, but already a focus of national interest and rapid growth.

One thing looks very clear, as advertising dollars dry up for newspapers and other print media, that money will end up somewhere. Much of it will end up online at increasingly sophisticated and entertaining web sites like Hulu. Advertisers everywhere are taking note and trying to figure out how best to exploit the web to their best advantage. We are witnessing the birth of a future mega industry. But will the Internet be able to keep up? Will AT&T, Comcast and others continue to cap internet usage just as YouTube, Apple, Hulu and their clones are ramping up the bandwidth required? The battle isn’t just for your attention, or for advertising dollars, it is also for your bandwidth.

Written by Todd · Filed Under Internet, Telecom