Hulu.com Goes Public Wednesday; New Deals With WB, Lionsgate, NBA, NHL, NCAA; Network Needs

This story was written by Staci D. Kramer.

For one, hulu.com still has to work as new users come in. CEO Jason Kilar and team have been careful about scaling, working up from a relatively small number of initial invites to extending access to employees of News Corp (NYSE: NWS) and NBCU to seeding invitations through blogs to offering each registered user 10 invites. There probably have been blips but not as noticeable as those at equally hyped start-up Joost. That has to remain true as more people pile on.

For another, hulu.com is only part of the equation. Even in beta, web viewers without a hulu.com invite could watch much of the programming on the hulu network through distribution partners AOL (NYSE: TWX), MSN, Yahoo (NSDQ: YHOO), MySpace and Comcast's (NSDQ: CMCSA) Fancast but most of the attention has gone to hulu.com. With the beta coming to a close, Hulu is going to have to prove its value as a distribution networkand its value to its distribution partners.

One exec I spoke with on the eve of the launch is excited by the potential and frustrated by the inability to fulfill it: "It is a killer, killer app, for sure, for consumers, but the bottom line here for distribution partners is success is kind of getting throttled." The basic problem, the exec said, is Hulu's insistence on having the partners use its own player instead of theirs combined with the low revenue sharingthink 30-70 or lower. The player is skinned for each site but it doesn't fit into the stream. Adding to the complications from the portal's perspective: Hulu isn't the only distributor that wants its own player.

The result is a more complicated process for the portals when it comes to spreading the video experience beyond the TV/video area of the site, say to the front page or to other subject areas where programs distributed by hulu could fit in. Sports, for instance, but each time the hulu video player has to be integrated into the site. "The problem right now is what is my incentive to promote or optimize the user experience against this if I can't even cover one engineer's salary. ... What am I going to do? The killer thing to do would be populate everywhere. ... There either has to be a higher CPM, more revenue share or volume flowing through." Again, this is someone who's cheering for the concept. "I'm not picking a fight ... there are a few traditional-media mental hurdles these guys need to get past to open this up and make this a watershed moment on the internet."

Much will depend on how Hulu and its network owners drive trafficto the networks or hulu.com, for instance,and whether the portals are left on their own. So far, the traffic is barely a blip, more acceptable in the early weeks than in the ones ahead. Conversely, Hulu gets relatively little branding from the portals; in most cases, if you didn't see the watermark, you wouldn't know.

Content: Hulu launches with new content agreements, including Warner Bros. Television Group; Lionsgate, providing a much-needed boost to the sparse movie library; NBA and NHL highlights/clips; and, as March Madness nears, a quarter-century of full-length NCAA Division I men's basketball championship and "more than 0 other top content providers." That last group includes Prom Queen and Onion News Network.

Advertising: When the beta launched and the distribution network started in October, Hulu had Cisco (NSDQ: CSCO), Toyota, Nissan, General Motors and Intel (NSDQ: INTC) as charter advertisers. In this launch announcement, Hulu says "it has received positive feedback from the advertising community and is renewing many of Hulu's charter advertisers since the beta period." Current advertisers include Best Buy, Chili's, DirecTV (NYSE: DTV), Intel, Nissan, State Farm, and Unilever. The House episodes I watched were sponsored by Tylenol and a movie.

Hulu.com's beta by the numbers:
-- In the past 30 days, more than 5 million viewers have streamed programs at Hulu.com or distributor sites. (The numbers that would really matter aren't included: streams served and unique users.)
-- More than 50,000 Hulu video players have been embedded on nearly 6,000 sites
-- Library has "more than quadrupled" since beta began, with video from more than 50 providers. Hulu now offers full-length episodes from more than 250 TV shows and clips from another 150 or so, including SNL and In Living Color. 
-- Roughly 18 weeks from Oct. 28, 2007 beta to planned March 12 launch.

By Staci D. Kramer