NEW YORK (AdAge.com) -- Hulu is everyone's favorite provider of TV on the web, but it's facing an ideological battle over its future. On one side are its network backers, which would like Hulu to become a paid service. On the other is the advertising community, which would like to keep Hulu free as a test-bed for new targeted-ad formats that can't be skipped. It's an important issue, because any debate about Hulu is a debate about the future of purely ad-supported TV, which is increasingly becoming an endangered species. Hulu is the No. 2 video site on sheer volume of video views behind YouTube, yet no one is yet making much money from its model: not its network backers, other content partners and least of all Hulu itself, which has a hard time paying for its bandwidth bills.
"[Hulu] does have to move to a premium model," said one network exec. "If you look at the business, it's just not economically feasible to give away programming at low rates."
Hulu won't comment on its economics, but if you consider that it's selling video ads and companion banners together in the $40 CPM range, and it appears to be about 50% sold out, when 70% is paid back to networks, Hulu is netting pennies per viewer per hour, about what it costs to deliver video of that quality.
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No one wants to delay what thier watching for ads, i recognize the issue at hand I feel that once you've been giving it away, its will be very difficult to now block usage and begin to charge for it. I think this will be a difficult task for Hulu.
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