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What Does Disney’s Investment in Hulu Mean for Apple TV?

Recently, Disney acquired 30 percent of Hulu for an undisclosed amount. It hasn't gone unnoticed by advertisers that Hulu has eclipsed YouTube in videos viewed in March, and Hulu is expected to generate US$120M in ad revenue this year. With the linkage to Disney via Steve Jobs, one has to wonder whether Apple will use this event to leverage the Apple TV.

While YouTube is still bigger in other specific metrics, advertisers like Hulu's business model for protecting IP and advertising ROI. Also, Google has been slow to monetize YouTube for general TV viewing and has irritated some content owners in the past. Hulu is on a roll.

Of course, there is a never ending debate about advertising supported content vs. paid content and no commercials, as on the Apple TV. There are those in the TV industry who believe there will always be a place for advertising supported, that is, free content, whether it's on broadcast TV or the Internet. That said, does Apple have a particular axe to grind to support only its current business model on the Apple TV? I know of no concrete evidence to support that notion.

As we know, just about anything can be achieved if there's common interest combined with the transfer of funds, even if behind the scenes. So, for example, what if Apple decided that competing with Netflix and others is more important than sticking to a strictly paid content model?


Apple TV


Apple TV: So Far, Just a Hobby

Apple could, for example, offer to place Hulu on all of its million or two Apple TVs in place. In exchange for that increase in exposure to the home audience -- before some other technology takes the issue out of Apple's hands -- Apple would receive, say, a percentage of Hulu's advertising revenue. This might be a good time to move in before Ethernet enabled HDTVs ship standard with Hulu access.

While the money Apple would make would be small, it could also be an accelerator that would propel Apple TV sales. After all, customers want choice, and the option to watch Hulu content for free probably wouldn't entice a lot of Apple TV buyers to stop buying content deliciously free of commercials. History suggests it would increment, not decrement Apple TV revenue.

I see a window of opportunity here for Apple. The pluses outweigh the single-minded obsession with paid content only on the Apple TV:

  1. Countering Netflix - a company also on a roll.
  2. A new revenue source. Apple loves those.
  3. Strong, new reason for consumers to buy Apple TV

The Disney connection to Apple is hard to ignore, and the Apple TV is much in need of a new business angle that could secure its future.  Perhaps Disney's three new board seats in the Hulu venture and the vision of Disney and Robert Iger is queued up to be introduced into Apple's own psyche by none other than Mr. Jobs. 

6 comments from the community.

You can post your own below.

guest said:

Since Boxee is at odds with Hulu over displaying content on a TV (as opposed to a PC or handheld), AppleTV would likewise be at odds with Hulu, unless Apple paid Hulu (not the other way around).  Hulu’s owners are still committed to protecting their other lucrative cable revenue stream.


John Martellaro said:

I can’t imagine that.  Apple has a mantra: we “earn” money, we don’t “pay” money.  Also, so long as advertisers are footing the bill, Hulu is seen as incremental revenue, covering bets, not a threat. Finally, the point of the editorial is that Apple no longer needs to be at odds with Hulu. IMO.


guest said:

That’s why what you propose won’t work.  I don’t think Apple has anything against ad-supported streaming as evidenced by YouTube, but Apple would not offer to pay anything to Hulu (as you say).  But Hulu will not let Apple show its content on a TV via AppleTV.  Hulu definitely says yes to iPod and iPhone in addition to Mac, but not to AppleTV, because its owners are protecting its lucrative cable revenue stream.

Artificial, silly, self-defeating of Hulu.  But it is Hulu’s attitude that needs to change, not Apple’s.  And the ruckus with Boxee shows that that attitude is not changing anytime soon.  If Apple wants to grow AppleTV now, it will need to turn elsewhere, possibly to gaming or to older movies (a la Netflix).


deasys said:

Apple could, for example, offer to place Hulu on all of its million or two Apple TVs in place

According to an old article from March 2008 from your sister site, iPodObserver, Apple had sold 1.6 million units in 2007 and was expected to sell 2.9 million units in 2008. That’s a total of 4.5 million units, John. Now that we’re almost halfway through 2009, how many do you think are out there now?

I’m sure it’s a lot more than “a million or two…”


raNdOM said:

Apple hasn’t launched an aggressive campaign to put an Apple TV in the hands of billions of consumers yet because they haven’t the perfect plan - yet. Unlike MP3 players, the market has been lean with a model of delivering video media to the masses while remaining profitable. That is where the iPod came in and destroyed the competition - with a solid model and plan. Both short and long term.

Additionally, Hollywood is nothing if not greedy. The music industry was already on their knees and needed “out of the box” thinking to help them remain sustainable. Only now are some media moguls realizing that they’re headed in the same direction. The difference… there are still too many that remain far too greedy for the industry’s good.

Apple and Jobs know this and are likely formulating a solid foundation to launch a plan. The trick is to balance profitability with consumer demand. And right now Hollywood doesn’t give a rat’s ass about consumer demand.

Personally I don’t need a stand alone device in order to watch downloaded media in my home. The Mac Mini I have attached to my 1080p HDTV works just fine. Some need dumb terminals… some don’t… that is probably the dilemma facing Apple. How do they provide product that is acceptable at a global level without restricting their margins and user experience.

Only time will tell.


John Martellaro said:

Here’s Bob Cringely’s take on the whole thing.


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