Hulu.com has been billed as a rival to YouTube, but Google's ( GOOG) popular video site has nothing to worry about. The real victim here will be cable TV. Hulu, an online video site that went live with a test version on Monday, was developed in a partnership between General Electric ( GE)-owned NBC Universal and Rupert Murdoch's media empire, News Corp. ( NWS). Unlike YouTube, Hulu offers free viewing of full-length films and TV shows from the media giants. But Hulu has none of the grassroots, user-generated content that has made YouTube a global phenomenon. Instead, it merely provides a way for consumers to watch TV online, bypassing the headaches, limitations and costs of cable or satellite TV service. "It's time for cable companies and telco TV providers to go on fear watch," says Forrester Research analyst James McQuivey. "As consumers get more access to their favorite TV shows and movies through their Internet connection, they're going to start asking themselves why they're paying their cable bills." The launch comes as the future of established news and entertainment content creators -- from newspapers to magazines to TV networks -- has been called into question by the rise of Internet search portals. The Web firms suck up the offline media's ad dollars by delivering everyone's content free to consumers with the ease of a mouse-click.
In TV, the biggest threat for the networks comes from YouTube, and the battle between the video site and the media heavyweights has become heated. Viacom ( VIAB), for one, has filed a $1 billion lawsuit against YouTube that alleges copyright infringement of clips from hit shows such as Comedy Central's The Daily Show With Jon Stewart and The Colbert Report. Aram Sinnreich, managing partner with Radar Research, says that while YouTube has dominated the Web video race, it's not a great place to watch network TV shows, such as 24 or Saturday Night Live, in their entirety. "You can't rely on YouTube for watching your favorite TV shows," says Sinnreich. "If Hulu's launch means that 24 is going to be available online on-demand for free, that's great for consumers and it's going to create a lot of traction. But don't compare it to YouTube. They're competitors in the sense that they have video content online, they want to sell ads and they want to capture user minutes and eyeballs, but other than that, they're completely different kinds of ventures." Hulu will offer hundreds of episodes of current shows and reruns with none of the copyright concerns that hamper YouTube. Its content has already been edited for television broadcast, and it will be interspersed with short, online ads in places where they would appear on TV.
It will host programming from NBC and News Corp.'s Fox Broadcasting, as well as TV shows and films from Sony Corp. ( SNE) and Metro-Goldwyn-Mayer. The shows will be available at Hulu.com, as well as on distribution partner sites such as Time Warner's ( TWX) AOL, Microsoft's ( MSFT) MSN, News Corp.'s MySpace, Yahoo! ( YHOO) and Comcast ( CMCSA). While networks such as CBS ( CBS) have successfully offered their shows on the Web, Hulu will provide a one-stop shop for advertisers to invest online around hit TV shows, and it won't suffer from the same content limitations that face a single network. Still, Sinnreich says Hulu is likely to suffer from the technological limitations that weigh on many of the online efforts launched by major media conglomerates. "Content owners tend to be more security conscious from a tech standpoint than neutral third-party media companies like YouTube, and because of that, their stuff tends not to work as well," says Sinnreich. "It's often clunkier, more flooded with annoying advertising and more prohibitive, which is bad for the user experience." He compares Hulu to Motherload, the Viacom site where users can watch Comedy Central clips. "It's more an extension of the brand and distribution channels that we see on traditional television or cable networks," he says. Meanwhile, McQuivey says major cable operators such as Time Warner Cable ( TWC) and Cablevision ( CVC), as well as satellite service providers like DirecTV ( DTV) and EchoStar ( DISH) will be watching Hulu's launch with trepidation, because it represents the beginning of an inevitable shift to watching TV on the Internet. "Cable companies are being targeted by this," says McQuivey. "Satellite is already under threat by digital cable. They don't have nearly the on-demand capability that cable and certainly the Internet can provide, so I've already written them off." For its part, Comcast is a distribution partner for Hulu. A spokesman for the company could not be reached to comment on its role in the venture. "Comcast will have a front-row seat to gauge the threat of stuff like this to its cable service," says McQuivey. "They want to deliver online video, because they know that if they don't, someone else will."