Is Hulu coming to Australia? And if so, what are the challenges?


Over the past week there’s been a bit of discussion around whether the US video entity Hulu has entered into a Memorandum of Understanding with PBL/Nine about setting up a local presence.

This has been driven by SMH writer Julian Lee who claimed this happened last year (no source however) in this article – http://www.smh.com.au/business/media-and-marketing/freeview-says-industrywide-catchup-service-not-dead-yet-20110203-1afgc.html?skin=text-only

Right now online video is still very niche in Australia, and you could even argue it’s niche globally – especially when it comes to professionally made content that goes beyond 2-3 minutes.

Hulu revenues in 2010 were reported at $240m – which is barely a blip on the radar for the companies involved (One shareholder, News, reported revenues over $8b for Q4 10) and reports are Hulu is seeking a cap. raise around $2-300 at a $2b valuation to help fund growth opportunities.

One of these growth areas could be Australia – maybe. The big questions are
– What is the revenue opportunity in AU?
– How can Hulu work in a market like AU which relies so heavily on licensed programming?
– Would Hulu be a one stop shop (similar to how it is in the US – excluding CBS) or would it be limited?
– What benefits would Hulu get in partnering in AU aside on ground ad sales?

The biggest question is around Australian’s appetite for a video on demand service like Hulu and whether it can sustain itself and build into a significant business of a similar scale to Pay TV or at least the multichannels.

I wrote a piece 2 years ago crunching the numbers around what I felt was required takeup wise – https://talkingdigital.wordpress.com/2009/09/14/73-9-is-the-magic-number-for-online-video/

This required all internet users to spend around 73 minutes a week watching professional video for the industry to be at 10% the scale of FTA revenues. This is with pure advertising revenue.

Hulu in the US has introduced a subscription service – Hulu Plus. It’s a $10 a month sub service which gives you HD access across a wide range of devices including game consoles and tablets. A similar initiative locally is Foxtel on XBOX360.

You’d imagine for Hulu to be exploring AU they’d be wanting local revenues anywhere between $30-50m within 18-24 months. That sounds high but it’s necessary – if there is in fact a JV there’s at least 2 mouths to feed (Hulu and PBL). Plus the AU FTA market is so large any entrant looking to erode this would need somewhat audacious goals. So, how would they get there?

Well – let’s assume 15% of this comes from subscriptions. That’s $7.5m. That would need 62,500 subscribers to the HD service for an entire year assuming a cost of $10 AUD per month. OR – 750,000 monthly subscriptions in total.

If the other 85% comes from advertising, that would require revenue in the vicinity of $42.5m. At a $50cpm this requires 850m video ads to be served. With an average of 4 ads per show this means just over 210m shows a year would need to be watched on Hulu. In full. 17.5m full program streams per month.

With 2m monthly users this would require just under 9 shows per user watched per month. 9 shows at 25 mins per show = just under 4 hours on the platform per user per month.

I guess this is the key challenge – how do you get a user to spend this amount of time on one site every month? It doesn’t sound too ambitious – however when you look at the amount of time spent on most websites per month (ex. Facebook) it’s generally in the minutes. Not the tens of minutes and definitely not in ‘hours’.

Hulu coming to AU is a very exciting development if it is happening. It brings world class content and a great platform. It brings over 3 years of US learnings as well around UI and content. And it brings a more mature outlook to video in Australia which goes beyond hype and big future predictions (ie – mobile industry for the past 6 years) and focuses more on building a viable, competitive business.

Ninemsn would be a great partner as it’s a strong business with a strong exec team.

I feel the ad market is ready for something like Hulu. The big challenge – generate the consumer demand required to turn it into a $50m business within 18 months.

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3 responses to “Is Hulu coming to Australia? And if so, what are the challenges?

  1. Pingback: Delimiter – Could Hulu come to Australia?

  2. I wonder whether David Leckie’s (in)famous and alleged “get the fuck out” tirade to the Hulu team on their visit to Australia will bite him in the bum?

  3. Pingback: Tweets that mention Is Hulu coming to Australia? And if so, what are the challenges? | talking digital – Ben Shepherd -- Topsy.com

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