Is Hulu an Anticompetitive 'Cartel'?


A digital penny here, a digital penny there, and pretty soon you’re talkin’ real money.

Hulu CEO Jason Kilar, speaking at the NewTeeVee Live conference Wednesday, said the NBCU/News Corp./Disney-0wned venture is on track to generate $240 million in revenue 2010, more than twice its sales of $108 million in 2009. The site’s 352 advertisers include the 25 biggest spenders in the U.S., he said, according to AP.

It’s not clear what Hulu’s bottom line looks like, but the company has previously said it was profitable in Q4 2009 and Q1 2010. Meanwhile, Hulu has been reportedly gearing up to go public in an IPO that could raise more than $2 billion.

But is Hulu an anticompetitive cartel that’s cramping its members ability to develop more innovative business models and products?

In a posting Monday on TechCrunch, GRP Partners venture-capitalist Mark Suster compares Hulu to OPEC — arguing that Hulu was created with “the goal of limiting the supply of high-quality online video available in order to defend high prices of the supply of this content on televisions through cable, satellite & broadcast TV.”

I don’t fully buy Suster’s line of reasoning. If anything, Hulu has weakened the broadcast networks’ position when it comes to demanding retrans fees from TV distributors. He also suggests Hulu’s owners would be wise to ease restrictions on windows — which Suster terms “contractual obligations that bind [Hulu] to your archaic industry norms.”

Huh. You mean those archaic industry conventions that produce billions and billions of dollars in advertising and subscription revenue? Hulu wants to monetize high-value video through alternate distribution channels, and it’s evidently doing that to the tune of $240 million this year, but its owners aren’t stupid enough to unleash a wave of content that would devalue their current businesses.