Another Losing Runner in the Online Content Race

Many of the companies that have entered the online content business have stumbled. Amazon.com (NASDAQ: AMZN) has a service. So does Walmart (NYSE: WMT). There are already several leaders, including crippled Netflix (NASDAQ: NFLX) and the very well established cable companies.

Hulu is a relatively small premium content site that is owned by Walt Disney (NYSE: DIS), Providence Equity Partners, News Corp. (NYSE: NWS) and the NBCUniversal unit of Comcast (NASDAQ: CMCSA). Hulu says it will press into the paid content business as well. Hulu’s CEO, Jason Kilar, said at a recent AllThingsD conference that, “It is important that we deliver great content and stories that aren’t being told right now. And that serves two purposes. One, consumers are asking for it. And second, it does build up healthy differentiation versus other services.” What stories and what differentiation?

The major internet content and traditional VOD services have most of what consumers want. Otherwise, they would have no chance at success in the industry. It is important to have Saving Private Ryan in inventory. It is not important to have a French period piece from the 1930s — particularly if it does not have English subtitles. Kilar knows that. His chances of success are tiny.

No one will entirely elbow aside the cable box on the top of most TVs, whether that box is from a cable company, satellite company or telecom operator. Netflix forced its way into the home through its initial DVD business. No other competitor had that early advantage, least of all Hulu.

Hulu also has to compete with several extremely well-financed businesses that nonetheless are likely to fail because they are late to market. First among these is the largest video site in the world — Google’s (NASDAQ: GOOG) YouTube. Despite its size and the size of Google’s balance sheet, Hollywood studios have been wary of YouTube’s hundreds of millions of amateur clips and its reputation as a site on which premium content is sometimes found without the permission of the owner.

Hulu is among of the last premium video companies to try to bring content to the living room. Even if it was not too late, it is too small and has no competitive advantages.

Douglas A. McIntyre