A few years back, legacy airline carriers interpreted the successes of JetBlue and Southwest as being largely about brand and customer experience. Delta created the fun and hip Song and United launched Ted. Neither venture was very successful because the things that made Southwest and JetBlue so competitive were largely a function of their not being burdened with legacy costs like pensions, spoke and hub route systems, poor labor relations, etc. Southwest and JetBlue could earn higher margins on the lower fares customers demanded than legacy carriers could. Song and Ted did nothing to alleviate the fundamental, structural problems weighing down their parent companies.
Hulu is owned by NBC Universal, ABC and Fox, and while the situation is a little bit different than the airline business, it is still a worthwhile comparison. If Song and Ted had suddenly taken off and demonstrated vastly more long-term potential for their large legacy owners, how would those legacy carriers have responded? Southwest and JetBlue could launch very effective threats to the established order precisely because they were not part of the established order.
Ads on Hulu compete against those on the broadcast networks. It’s a situation that is stable for now, but once the cannibalizing of business models gets to critical mass, something will have to give. Slate’s ‘The Big Money‘ blog (which we recommend) has an interesting piece about Hulu evolving into a de facto ad agency of its own — it is doing the creative work to produce internet-specific spots for its sponsors. A sentence from the closing paragraph sums up the situation well, though probably not the way the author intended. The TV networks have no interest in being beaten by their own creation: