LINDA WERTHEIMER, host:
With people watching more and more video online, Hulu.com has emerged as the most popular site for Hollywood, TV shows and movies. Its growing exponentially, and as NPRs Elizabeth Blair reports, its advertising is up too.
ELIZABETH BLAIR: Lets go to Hulu.com and click on TV, and the networks have a lot of their hit shows on here. They have Greys Anatomy from ABC, they have Comedy Centrals Daily Show and The Simpsons from FOX.
Unidentified Man #1: The following program is brought to you with limited commercial interruption by the third-generation Prius.
BLAIR: And theyre not kidding about limited. In the whole episode I only have to watch three commercials.
(Soundbite of TV show, The Simpsons)
Mr. DAN CASTELLANETA (Actor): (as Homer Simpson) Whoa, whoa, whoa. You come to school to help him to get good grades? Isnt that why we pay public school teachers those enormous salaries?
Mr. ALAN SEPINWALL (New Jersey Star Ledger): Hulu has made my life as a TV viewer and a TV critic much easier.
BLAIR: Alan Sepinwall of the New Jersey Star Ledger.
Mr. SEPINWALL: Because I can watch shows, for the most part, when I want, on my own schedule, whether Im at the office, at home, you know, any location.
BLAIR: About 40 million people watched Hulu in May - up almost 500 percent from last year. Thats according to the research firm comScore. But thats still small compared to regular TV, and yet Hulu charges more for its advertising, sometimes twice as much.
Michael Hayes of the Ad Agency Initiative.
Mr. MICHAEL HAYES (Ad Agency Initiative): If you look at a primetime show on television, the average rate is about $25 on a cost per thousand basis.
BLAIR: Thats cost per thousand viewers. So, the bigger the audience the more expensive the commercial.
Mr. HAYES: If you look at a primetime show on Hulu, its anywhere from $40 to $60 on a cost per thousand basis.
BLAIR: Thats about a 60 percent difference between Hulu and TV. Hulu is tightlipped about its revenue but it is attracting some pretty major advertisers.
Unidentified Man #2: Sprint, the Now Network.
Ms. CHRISTINA LEE (Spokesperson, Hulu): Theres a couple of reasons, I think, that advertisers are interested in the online video environment.
BLAIR: Christina Lee is a spokesperson for Hulu.
Ms. LEE: On Hulu in particular, you cant fast forward through the ads. A lot of viewers are more engaged. Given that, were seeing ad effectiveness go up.
BLAIR: But in the episode of The Simpsons I watched there were only three commercials. Its believed the online audience wont tolerate much more. And that kind of limit is never going to bring in as much money as a TV show that has a lot of commercials, and thats the fear in the TV industry - that video online will never be as profitable as TV and that slick shows, like CSI and House are expensive to produce.
Michael Hayes quotes Jeff Zucker, the head of NBC Universal, who said the TV networks dont want - as he put it - end up trading analog dollars for digital pennies.
Mr. HAYES: Theres two opposing challenges here. Number one, the cost of producing professionally-produced content, and the revenue that they will generate when they move that content online to be supported by an ad model that is fundamentally different than what it is on television.
BLAIR: For now, the networks seem to be holding back a little - they dont put everything on Hulu. They want you to give you a reason to watch your good old-fashioned TV set - and all those commercials.
Elizabeth Blair, NPR News.
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