For established content creators such as Disney, Hulu just does not make enough to pay enough for content.

Next, Hulu's revenue-per-subscriber figures is similarly bush league. Assuming 30 million unique monthly customers, and again, $420 million in total sales, that works out to a back-of-the-envelope $14 per year in average revenue per unique user. For networks such as Comcast, that's Armageddon talk. That operation did a cool $55.8 billion in top-line revenue last year while serving only roughly 22 million or so total subscribers. Again, back-of-the-envelope that grosses up to a round-number $2,400 in average revenue per subscriber. Sure, Comcast has a broadcast division, sells broadband services and other products. But even factoring those dollars, Hulu per subscriber sales are whole orders of magnitude too small.

Hulu = Netflix 2.0
Even more bizarre, Kilar has Hulu on track to only make things Coyote Ugly for its backers. At issue is so-called "cord-cutting." That's what the Pew Charitable Trust calls the process of multichannel TV subscribers -- that's Comcast's customers -- abandoning pricey pay-TV services in favor of lower-cost Web options such as Hulu.

So yes, Hulu's paid subs are growing at warp speed, but these customers are coming directly at the cost of lucrative subscribers from established media companies such as News Corp, Disney and Comcast. All Kilar is doing, therefore, is turning a high-end, high-margin cable subscriber into a low-end, low-margin Hulu subscriber.

Which leaves Hulu's backers in one serious stew: Somehow they must extract what little value there is in Hulu, but do it in a way that does minimal damage to their established businesses. And this Houdini trick must get pulled off in a brutal race-to-the-bottom digital content slum that's sinking similar content plays including Netflix ( NFLX) and YouTube ( GOOG).

According to the company, there is no actual definition for the word Hulu. My vote therefore is "There will be blood."
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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