Hulu Acquires Video Genome Project in Run-Up to Live TV Service Debut

Video on demand service Hulu has agreed to buy video metadata company Video Genome Project as it looks to improve its content recommendation capabilities. 

Terms of the deal, which was announced Tuesday, weren't disclosed. Hulu said it expects to integrate VGP's data into its recommendation system by the beginning of 2017. 

The service will be handily integrated just in time for the launch of Hulu's live TV offering, which it expects to roll out in early 2017. So far, the Los Angeles company has reached streaming agreements with 21st Century Fox (FOXA) , Disney (DIS) and Time Warner's (TWX) Turner Broadcasting System.

It's unclear how much content these partnerships will generate because additional deals are possible, a Hulu representative said. The Disney and 21st Century Fox agreements alone encompass 35 networks, including broadcast networks ABC and Fox, respectively.

Founded in 2013, VGP assigns "genes" to TV shows and movies based on the hundreds of characteristics recognized in metadata. The video genes go beyond just genre, cast or director, using attributes like "father and son story" or in the case of linking Empire and Pretty Little Liars, both are shows where music is central to driving the plot. 

VGP's recommendation technology builds upon Hulu's existing suggested programming infrastructure, the company said. The VGP deal stands to benefit a large chunk of Hulu's customers, as the company said about 75% of all viewing on Hulu is driven by recommended programming. 

"The future of television is not just going to be about where and how you watch, it's going to be about how personal your viewing experience can be," said Ben Smith, Hulu's head of experience, in a statement. "With this strategic acquisition of The VGP's technology, we're gaining important data and personalization capabilities that will allow us to serve our users even better as we expand into live programming."

The over-the-top content market is poised to become increasingly competitive in the coming years as more companies roll out their own live TV offerings. Hulu will be directly competing with Dish Network's (DISH) Sling TV, AT&T's (T) DirecTV Now and Sony's (SNE) PlayStation Vue, among other services, Recon Analytics analyst Roger Entner said.

An obvious difference between the streaming services is the content providers with which they have reached agreements. DirecTV Now, for example, has not reached deals with Fox or CBS (CBS) , which also has not signed on to Hulu's new service.

Entner also noted, however, that discovery and recommendation features are a key function of the services. 

"It all depends on integration and how it works in the end," Entner said. "If it can provide good recommendations, that's worth a lot."

For that reason, Entner said Hulu ideally would have acquired VGP six months earlier, so that the metadata technology of the Santa Monica, Calif., company is seamlessly integrated into Hulu's live TV service once it launches. 

When looking at the overall live TV market, each platform has to focus on having a consistency of vision, both in aesthetics and user experience, Entner added. 

"What's quite interesting is how uneven the user experience is across platforms," Entner said. "On a PlayStation, it looks awesome, but on a Roku you just want to shoot yourself."

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