Is Hulu Overtaking YouTube?

(MoneyWatch)  Hulu is getting new content and cash from Disney, giving it an impressive line-up of broadcast TV content for its online video site. This announcement comes barely a week after Google's YouTube video site announced partnership deals with a slew of movie and television studios, including Lion's Gate and Starz.

The deal is a significant boost to Hulu as it seeks to leapfrog Fox Interactive, which owns MySpace, for the second spot in viewership behind YouTube, and could eventually help it overtake the overall market leader. But it still has quite a way to go before that happens.

Chris Dale, a spokesman for YouTube, noted in an email that the average YouTube viewer spends 150 minutes per month on the site (the figure was 134 in February, according to comScore). Either way, that's more than double the 64.5 minutes per viewer spent on Hulu in February. In March, YouTube retained the lion's share of online viewing, with a 41 percent share of videos watched, compared with just under 3 percent for Hulu; Google also doubles up on Hulu in terms of unique viewers.

It's a little unclear where Fox belongs in all this. According to comScore, it outpaces Hulu in terms of overall video streams, 53.8 million to 34.8 million; but Hulu absolutely crushes Fox when it comes to minutes spent on time per user, which is a metric advertisers care most about. And the most recent figures from comScore also show that Fox has only a miniscule lead over Hulu in overall market share, 3.0 percent to 2.6 percent. That lead is likely to disappear with the addition of ABC programming.

But given YouTube's crushing market leadership, why should Google worry about Hulu, or anyone else? For starters, Hulu is showing very strong growth, going from 34.7 million unique viewers in February to 41.6 million in March, a leap of more than twenty percent. By contrast, YouTube grew from 99.4 million unique viewers in February to 100.4, an increase of one percent. YouTube's commanding position may be comforting, but even Google isn't hubristic enough to ignore 20 percent growth, regardless of the lower base upon which that increase is built.

Moreover, Hulu has been adding to its programming on a consistent basis and now has agreements in place with all the major television studios save CBS (parent company of BNET). Meanwhile, most traditional content owners still look upon Google with suspicion because of its sheer size and propensity for acting with seeming disregard for the rights of copyright owners.

Kurt Scharf, principal analyst at Parks Associates, told me consumer behaviors indicate they prefer a one-stop shopping experience when it comes to watching online video, as opposed to clicking from site to site. I suggested that in that case, YouTube has an advantage over Hulu thanks to the number of users who upload their own content to the site, but Scharf disagreed. "That's not necessarily a competitive advantage over sites that offer specifically premium content," he told me.

According to Scharf, consumers are likely to migrate towards a single site, like Hulu, where they can watch their favorite television shows. "We're going back towards a more walled-garden version of the Web [like portals in the early days of the Internet] in that sense," Scharf told me.

Scharf believes there's going to be even less room for a third competitor like Joost or even Fox going forward, in which case the battle will increasingly pitch YouTube against Hulu for which garden party consumers will prefer to attend.