Why Hulu Shouldn't Be Silent This August

Update 8/4/2014: Includes information from Hulu's director of brand marketing, original content and advertising.

PORTLAND, Ore. (TheStreet) -- Hulu's Hulu Plus is widely available, intuitive and stocked with network shows its subscription-based competitors lack. Shouldn't it be making a bit more noise as fall premieres approach?

We're about a month away from the networks debuting their new shows and, unlike Netflix  (NFLX) or Amazon's (AMZN) Amazon Prime Video, Hulu Plus can actually show them a day after they air. Apart from esoteric content from the U.K. and the occasional original series, that's the biggest lure of the $8-a-month Hulu Plus subscription. Yet Hulu's powers that be spent much of the summer hitting the mute button on the service's marketing department instead of promoting Hulu as a means for cord-cutting viewers to get their network fix. Tom Walker, Hulu's director of brand marketing, original content and advertising says Hulu is gearing up to run ads through digital channels and on network and cable television later this month.

 

Good. Hulu had been far too silent since upfronts in April. At the time, it expended a lot of oxygen discussing original content including The Hotwives Orlando parody of Real Housewives starring Casey Wilson and Angela Kinsey premiering in July, and The Next Step, a reality-style drama about a dance studio.

Fantastic. File them with Moone Boy, East Los High, Quick Draw, the Emmy-nominated Behind the Mask. The Awesomes and British comedies like Pramface and Whites under "shows your subscribers only somewhat care about." Hulu did cartwheels over the fact that it reached 6 million subscribers, which makes its exactly one-sixth the size of Netflix's U.S. streaming audience of 36 million.

What's wrong with you people? You signed a deal with NBCUniversal that gets you exclusive rights to the actual Real Housewives franchise -- plus exclusive claim to shows like Brooklyn Nine-Nine and The Mindy Project -- and you're crowing about your service's answer to Netflix's Lillyhammer? You just scored exclusive rights to the entire CBS library -- including current series and catalog titles like Everybody Loves Raymond -- and you'd rather focus on Seth Meyers' Late Night moonlighting gig as a voiceover actor?

C'mon. These are huge wins. You got a deal with the BBC that, while not exclusive, pries shows including Sherlock, Luther and Dr. Who out of the domain of Netflix and Amazon. You weathered months of losses and debate and heard bids from Yahoo!  (YHOO), DirecTV (DTV), and Time Warner Cable  (TWC) before your owners -- a joint venture between The Walt Disney Company  (DIS), Comcast  (CMCSA)-owned NBCUniversal and 21st Century Fox  (FOXA) -- decided to steam ahead and invest $750 million into improving the whole experience.

Are we supposed to believe that Hulu went through all of that just to keep mum about its best content while Netflix and Amazon keep reminding customers that their streaming service doesn't involve any of Hulu Plus' pesky commercials? Before Hulu can "become the singular destination for all things TV” that chief executive Mike Hopkins envisioned at the upfronts, it has to become a destination for something. Anything.

That "something" should be its overwhelming amount of next-day content from NBC, CBS, ABC, Fox, AMC Networks, A&E Networks, Time Warner's Turner, Viacom  (VIAB) and elsewhere. But it isn't. By failing to capitalize on Viacom's flight from Netflix and Hulu's exclusive hold on The Daily Show and The Colbert Report, Hulu Plus created a window for Viacom to release its own Comedy Central app that offers viewers a way to stream those shows and others including Key and Peele and South Park -- as well as archived episodes of Reno 911 and Chapelle's Show.

Fox has since taken a similar approach, streaming episodes of Family Guy, Glee, New Girl and other shows through its Fox NOW app. NBC, CBS, ABC and The CW have all followed suit and all made Hulu a bit of a redundancy for its network masters.

What Hulu still has going for it, however, is its ability to pull all of that content under one roof and present it in a crisp, easy-to-use interface that's a lot friendlier than Netflix and Amazon's near-identical user options. Their new ads showcase all of that, but Hulu's relatively low profile in comparison to its competitors led our own Rocco Pendola to this observation last year on Twitter:

Unfortunately for Hulu, that old guard is still in command. The networks have little motivation to steer viewers toward Hulu and away from first-time airings and DVR recordings (each of which can be counted toward Nielsen ratings) or their own network apps (which they can use to reel in mobile advertising revenue that they don't have to share with their Hulu partners).

You see, Hulu is basically the media companies' little experiment. If they can manage to extract at least nominal revenue from streaming without having to pay exorbitant amounts for content, it's a win. It's a side business that generated $1 billion in revenue in 2013 after creating just $695 million a year earlier. That doesn't touch the $2.75 billion in revenue from Netflix streaming, but remember that Hulu Plus generated that much revenue with just 6 million subscribers. That same number of Netflix subscribers generates just $460 million, by comparison.

Hulu could put more of its cash toward marketing and ads like the Walker shared, but why? As the media companies see it, this is a sweetheart deal as it is. In many cases, Hulu's owners are already producing or buying the rights to the content and getting a sweetheart deal by using it to sell ads for it on multiple platforms. Not only that, but they're getting U.S. consumers to pay a subscription fee for network content that's otherwise free over the air or sold to cable and satellite providers for a nominal affiliate retransmission fee.

Basically, Hulu Plus is getting cord cutters to pay more for their network content than they would have if they just kept the cord in place. Convenience comes at a cost, and Hulu and its media companies have a lot to gain from switching viewers from one platform to another.

But that's isn't how they're going to play this. As long as the networks and channels themselves are the big game and Hulu Plus is just the bonus round, there's no need for the folks behind Hulu to blow their windfall on more marketing. That's a shame, considering how clever their marketing department's approach is. Perhaps Hulu is finally appropriating Netflix and Amazon's mindset -- where streaming is the only game in town. If that's the case, expect a lot more money and muscle behind bigger fall promotions in the near future.

-- Written by Jason Notte in Portland, Ore.

>To contact the writer of this article, click here: Jason Notte.

>To follow the writer on Twitter, go to http://twitter.com/notteham.

>To submit a news tip, send an email to: tips@thestreet.com.

Jason Notte is a reporter for TheStreet. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, the Boston Herald, the Boston Phoenix, the Metro newspaper and the Colorado Springs Independent. He previously served as the political and global affairs editor for Metro U.S., layout editor for Boston Now, assistant news editor for the Herald News of West Paterson, N.J., editor of Go Out! Magazine in Hoboken, N.J., and copy editor and lifestyle editor at the Jersey Journal in Jersey City, N.J.

If you liked this article you might like

Here's One Hint That S&P 500 Stocks Are a Screaming Buy

Here's One Hint That S&P 500 Stocks Are a Screaming Buy

GM, Teva, Facebook and Other New Jana Partners Positions

GM, Teva, Facebook and Other New Jana Partners Positions

3 Attractive ETFs for a Turbulent Market

3 Attractive ETFs for a Turbulent Market

Closing Bell: LIVE MARKETS BLOG

Closing Bell: LIVE MARKETS BLOG

Cramer: 10 Stock Surprises

Cramer: 10 Stock Surprises