For its first fiscal quarter of 2011, Viacom Inc. (NYSE: VIA) reported that profit fell -12% and revenue fell by -4.8% due mainly to weakness in the company’s film business. Viacom’s cable TV business prospered though, with revenue up 5.6% and profits up 7%. The TV business should get even more help from the announcement that Viacom has signed a new agreement with Hulu.com that brings Comedy Central’s “The Daily Show with Jon Stewart” and “The Colbert Report” back to Hulu after a year-long absence. But remarks by Hulu’s CEO could take some of the steam out of the re-signing.

Hulu is a joint venture of News Corp. (NYSE: NWS), Walt Disney Co. (NYSE: DIS), and NBC-Universal, now owned by Comcast Corp. (NASDAQ: CMCSA). Hulu shows popular TV shows and movies provided by its three backers as well as licensed content from other producers for free over the Internet. The company makes money by selling ads and by offering a premium service called HuluPlus, which shows fewer ads and is available on a variety of mobile devices.

Viacom pulled the two popular Comedy Central shows from Hulu following a dispute over payment. The new deal allows Hulu to show the programs the morning following their original airing.

At virtually the same time that Hulu signed its agreement with Viacom, CEO Jason Kilar posted a long article on Hulu’s corporate blog outlining Hulu’s position on the future of television.

Kilar essentially ripped his bosses, noting that traditional TV runs too many ads, that TV doesn’t care about what’s good for consumers, and that consumers now drive the content business. For starters, TV lives on advertising and Kilar’s comments did not sit at all well with Disney. A spokesperson for the company told the Financial Times that Kilar’s opinions are “personal and clearly not shared by anyone at Walt Disney.” News Corp. did not comment and NBC-Universal was unavailable.

The FT also cites a “person close to Hulu” who said that the owners were “furious.” This person points out that given billions of dollars worth of content he, too, could build a nice business. But “to build a long-term, viable business I would have to do so in a way that works for everybody.”

Kilar is trying to make the point that the highly targeted advertising available to services like Hulu is more effective and more consumer friendly than the blanket advertising of broadcast and cable TV. It is possible, he argues, to show fewer ads and make more money.

For content owners, Kilar suggests that if they want to make more money they should license their content to distributors like Hulu on a per-user, per-month basis, rather than a fixed-fee model.

Content providers like Viacom, Disney, and the others want to monetize their product as quickly and at as high a price as possible. That leads to huge up-front costs for services like Hulu. The same model is what is keeping the hugely successful (in Europe) music streaming service Spotify from launching in the US. Content owners are demanding licensing fees that are out of reach for start-up companies.

Hulu doesn’t face the same cash problem that Spotify does, so Kilar’s argument is a bit disingenuous. But he is right that a more reasonable licensing scheme could spur new competition in the online video business and lead to new and larger revenue streams.

Going to a per-user, per-month licensing scheme puts some of the risk back on content owners in return for a larger reward. Which do they want, a bird in the hand or two in the bush?

Viacom’s shares are down about -1.5%, to $49.70, at noon today after setting a new 52-week high earlier this morning of $50.75.

Paul Ausick

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