Hulu's Owners Consider Selling The Site

Hulu, the online television service, has become an online giant. It provides free content to millions of viewers every month, and its viewership continues to grow. Now, its ownership — a partnership that includes the parent corporations for ABC, NBC and Fox — isn't quite sure what to do with it. Robert Siegel talks Dawn Chmielewski, who covers how technology is changing the entertainment business for the Los Angeles Times.

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ROBERT SIEGEL, host:

What do you do with the monster you've created when you no longer know how to manage it? Well, perhaps you sell it. That's what the parent corporations of ABC, NBC and Fox are considering to do with the online television service Hulu.

Hulu gives people free access to network TV shows over the Internet, where the networks can still sell some advertising. It attracts some 27 million users every month - it's a monster. And now, the networks are getting scared of the threat it poses to their traditional business model.

Dawn Chmielewski writes about the business of online entertainment for the Los Angeles Times. She joins us now from Los Angeles. Welcome to the program.

Ms. DAWN CHMIELEWSKI (Los Angeles Times): Hi, Robert.

SIEGEL: And first, Dawn, what's the problem that ABC, NBC and Fox have with their successful offspring, Hulu?

Ms. CHMIELEWSKI: Right, you wouldn't think that media companies that had created such a successful online offering would find itself in a quandary here.

Here's the basic problem. The networks created an offering that is so successful that it's creating tensions with the rest of its businesses. NBC and Fox and ABC all provide programming that's distributed by cable operators and satellite companies, and that is a lucrative business. The fees from the cable operators alone is something on the order of $30 billion.

And here's the rub: Hulu, while it's growing, is providing the same sort of programming that one might find on their cable channels or on their satellite provider. And there's some fear on the part of the cable operators that perhaps Hulu's offering is so good that people will cancel their cable subscription and just watch Hulu for free.

So this has created an internal conflict between the media companies and their business partners, who built this very large and mutually lucrative business of television.

SIEGEL: So if I wanted to look at a "Law and Order" rerun, I could go to Hulu and watch it the day after. But as I'm doing that, I'm undermining some cable channel whose format is "Law and Order" reruns.

(Soundbite of laughter)

Ms. CHMIELEWSKI: Well, let's be clear. Now, Hulu provides the current season's programming. That's what makes Hulu different from a lot of the other online offerings. Hulu allows me to watch popular primetime shows as quickly as 24 hours after they've been initially broadcast.

Now, the cable operators are saying, hey, you know, we'd like to hold on to our subscribers and we would like to have the ability to offer that sort of catch up - the ability for our subscribers to catch up on an episode that they missed - we'd like that right. So therein lies the conflict.

SIEGEL: But in a way, they would be saying, here, Hulu - if they decide to sell the service - having launched you, we're now going to take the part of your competitors actually and help out the cable channels that you've been wooing viewers away from all this time.

Ms. CHMIELEWSKI: Well, the media companies see this perhaps as an opportunity. When Hulu was created, the online marketplace was a realm where people were watching short-form videos of dogs on skateboards, right? It hadn't been demonstrated that people would sit at their computers or, indeed, at their other devices, and watch a full hour of television. And Hulu was the proof point. With the demonstration that audiences were willing to do that, a market emerged.

So the media companies may see this as a moment to set Hulu free and sell its content across multiple distributors. This may be a moment for the media companies to find a way to make money from, not only from the distribution that Hulu provides, but also some other competitors in the digital marketplace.

SIEGEL: Dawn, thanks a lot.

Ms. CHMIELEWSKI: Thank you.

SIEGEL: That's Dawn Chmielewski, a staff writer for the Los Angeles Times, who covers how technology is changing the entertainment business.

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