MTDB 2010

HULU
Murali Erraguntala
José Enrique Martínez
Introduction
Market and Company Analysis

Correct Definition of the problem

Alternatives and Solution

Action Plan
Market Analysis
5 Porters’ Forces
Huge Capital Requirement
Potential Economies of scale
Entrants Contents Providers

MEDIUM

Rivalry Buyer Power

Supplier Power
HIGH HIGH HIGH
More Choice of Product
TV Industry
Contents Providers Less Asymmetric
Higher CPM Information
Forward Integration
Less Switching cost

Substitutes
HIGH
Traditional TV
Market Analysis
Market Size
130 million unique users who downloaded 10 billion streams
$1 billion was spent on advertising
Market Profitability
Market trends
Strong growth in popularity of online video platforms
Broadband (75% of penetration )and Mobile industry.

Key success factors

Increasing the availability of online content
Enhancing the user experience
Leveraging the capabilities of online medium
Ability to create two-sided network

Market Growth Rate

BMG Matrix
Internet TV

Cable TV Public TV
Industry cost structure: Value Chain
Software (flash application)
$0,105 $0,0225 $0,0225

Packaging & Distribution &

Content Sales
Hosting
(70% of Ad Revenue) Revenues at 40$ - 50%
(15% of Ad Revenue)
per CPM
$0,15
$0,105 $0,0225 $0,015 $0,0075

Hardware
HULU
 Marketing Strategy
Product
Customer Price

Target
SWOT
Promotion
Company Place

Competitors
The market
Customers
Customers
Users, Advertisers and Content Owners

Company
Company
Owners: ABC, NBC, News Corp. and Providence E.P.

Competitors
Competitors
Youtube, TV Everywhere, Veoh, TV.com, Metacafe…
The market
Strength
Strength
Ability to Leverage online platform
Owners
Leadership and innovation culture

Weakness
Unique source of revenue ( ads support)

Opportunities
Advertising market $60B.
Broadband and Smartphones (3G and 4G)

Threats
Threats
Lack of exclusive contract
Highly competitive market
The market
Segmentation Positioning
Positioning
Aggregator
High Speed Professional contents
Internet Users Free premium content
(40 million)

Premium Base
Subscribers Subscribers
(41 million) (64 million)

Differentiation
Differentiation
Self-service content
fsdfTargeting distribution
High Speed internet Advertising Strategy
users
Base Subscribers
The market
Product
Product and
and Service
Service
Embedded professional contents embedded
on internet
Sophisticate advertising tools
Price
CPM from 40$ to $50.
Place
Hulu.com and affiliate sites.

Promotion
Promotion
Events: Super Bowl; ABC (25M$)…
Company culture
Mission: “focus on helping
users find and enjoy the world
premium , professionally
produced contents when,
where and how they want it”.
Emphasizing frugality,
meritocracy, ownership and
other key values
Leadership style
Guide Missile culture
(Trompenaars).
Definition of
the problem
What are the problems?
TV Everywhere
At least 92% of Americans qualify to watch this for
free online
Comcast and Time Warner (70% of the cable
market)
Digital Convergence
User viewing habits (300 minutes on traditional TV
Vs 10 minutes on internet TV)
25% less load on internet TV advertising.
What are the problems?
Digital Convergence – Is Industry Ready?
Increased viewership by 20%
Revenue loss per 1000 viewers for an hourly
content on internet TV is 280$ (Approximately)
Suggested
Alternatives
Suggested Alternatives
Option 1 – Continue Advertising Model
Pros
Advertising markets is 60$ billion
Hulu can maintain a unique position of offering premium content for
free
Same level of offering for all the customers
Cons
Single revenue stream
Risk of alienating premium content providers like HBO
Windowing issues
Suggested Alternatives
Option 2 – Free + Pay-per-view Model
Pros
Dual revenue streams
This model will be of interest to premium content providers like HBO
Cons
Hulu will lose its unique value proposition
Buyers might not be willing to pay for the same content twice
Clear distinction of offerings between free and paid services
Suggested Alternatives
Option 3 – Join hands with “TV EveryWhere”
Pros
Hulu can thwart competition
Possibility of exclusive contract with content providers
Access to cable subscribers of Comcast and Time Warner
Cons
Hulu might become a mere platform that offers online video
Value proposition of Hulu and “TV EveryWhere vary considerably.
Hulu “TV EveryWhere”
Target Audience Broadband users (40 Cable subscribers (77
million) million)
Windowing Period Small Large
Ads Fewer Same as TV
Duration of Ads Shorter Longer
Suggested Alternatives
Option 3 – Join hands with “TV EveryWhere”
Is “TV EveryWhere” really a threat?

Hulu
2

0
Windowing (31%) Fewer Ads (26%) Picture Quality (22%) Shorter Ads (20%)
Chosen
Alternative
Option 1: Continue with Advertising Model
Business
Strategies
Business Strategies
International Expansion
Business Strategies
Exploit Long-tail
Create two-sided networks
Enhance user experience
Continue innovating new
tools like “Hulu Desktop”
Make the content available
in Mobile and Other
Devices
Business Strategies
Targeted Advertisement
Targeted Advertisements (contd..)
Plan of action
Action Plan

Actions Time Horizon Resources Expected

Revenue
Diversification 6 – 12 months 1 country 24$ million
(UK) manager and 2
sales person
Cost:
$250,000/year

Market 6 – 12 months Advertising 40$ million

Penetration Manager(s) from
traditional TV
Cost:
$300,000/year
Thank you
Financials
Diversification

USA statistics after 1 year of inception

Unique viewers/month: 40,000
Average minutes viewed per month: 60 minutes.
Total TV viewers: 110 million

In UK
Total TV viewers: 30 million
Expected statistics after 1 year of inception in UK
Unique viewers/month: 10,000
Average viewership/month/viewer: 60 minutes

So the average revenue per viewer per month is $200.

So the total revenue is 10,000 * 200 * 12 = 24$ million
Financials
Market Penetration

Hulu is currently using only 60% of the advertising inventory.

Our strategy is to increase the usage by 20%

Hulu.com. For this purpose, we would wish to hire advertising managers in traditional TV who
has better relationship with advertisers.
 
120$ million revenue in 2009 with 60% usage of advertising inventory.
With 20% increase, we can increase the revenues by 40$ million.