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The Digital Skeptic: Hulu = Netflix 2.0

Stocks in this article: CMCSA NFLX

NEW YORK ( MainStreet) -- Running a Hollywood movie studio might be Mission Impossible. But running an online movie studio? That's Die Hard, with a Vengeance.

Just ask Jason Kilar.

The Harvard-educated Kilar is the fellow who, back in 2007, help found Hulu, the online content service that now claims 30 million unique monthly users. Hulu resells content from 350 top-end content providers including MTV, Spike and The Onion. More importantly, it counts serious Hollywood goodfellas as backers: NBCUniversal -- that's Comcast (CMCSA) these days -- News Corp (NWS), Walt Disney (DIS) and what Variety says is a $100 million stake by Providence, R.I.-based Providence Equity Partners. That's the company with similarly big stakes in Spanish-language service Univision and the ridiculously successful Yankees Entertainment & Sports Network.

It's safe to say Kilar is not killing it right now.

Last week, the Internet rumor mill lit up over a Variety report that laid out major restructuring at Hulu -- including the potential departure of Kilar. Apparently, sources say, his Comcast and Walt Disney captains are none too happy as plans apparently are to limit the content available on the service, tightening the windows when certain popular shows run and, overall, nudge Hulu further down the digital content food chain.

This would be just another executive reshuffling in Hollywoodland, save for one fact: Kilar's Hulu is seen as having major voodoo powers in the otherwise grim digital economy. It makes what appears to be serious box office -- $420 million in total revenue and 1.5 million so-called Hulu-Plus premium customers, each of whom pay $8 a month for premium content. Hulu makes its own shows and the company announced a major redesign earlier this week.

"We expect our subscription services to account for more than half of Hulu's overall business later this year," Kilar said in a company blog back in January. "We will remain relentless in our pursuit of better ways."

Which all may sound boffo, but a fast-forward through Hulu's numbers shows what company backers are cranky about: Yet again, investors are facing digital content play in a Netflix-like long, slow fade to black.

No Clue at Hulu
Sadly, as with most of the digital economy, it's far too easy to see what Brian Roberts, CEO at Comcast, or Bob Iger over at Disney stew over about Hulu. Yes, the firm has 350 content vendors. But assuming the $420 million a year in sales is correct, that works out to just $1.2 million in revenue per vendor. That's not per show or per series or per franchise. That is per company ... per year! Compare that with the $3.5 million Chris McCloskey, a spokesman for NBC, told Bloomberg his company charged for a single 30-second commercial during last year's Super Bowl.

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