Hulu

With Hulu about to officially launch, here are some quick ways to get smart.

First, check out the site when it debuts, probably some time this week.  (If you can't wait, email me and I'll give you one of my ten "invites" to the beta.) The site has an elegant interface and high quality video.  (I watched it in my office on a 24" Mac from six feet away.  It was great.  There just might be something to this TV on the Internet thing.)  And though the programming selection seems scattershot - just 5 episodes of House, 9 episodes of The Office, the entire 39 episode first season of Alfred Hitchcock Presents but none of the second or third seasons - I can't be too critical of any site that lets me watch all of Arrested Development whenever, wherever and for free.   

Also see Fortune Magazine's fawning piece about the company, a joint venture between Fox and NBC, with a $100 million investment from a possibly crazy venture capital fund.  The article, complete with photos of geeky programmers and laughing execs, reveals Hulu has spent $15 million so far, is run by a former Amazon executive Jason Kilar who brought a start-up culture to the venture (we're told he "abandoned the palatial corner office he'd been assigned in Santa Monica for a near cubicle") and that Google has nicknamed Hulu "Clown Co."  Cocky bastards, those Googlers. 

The famously fallen (and savvy) Internet analyst Henry Blodget explains Hulu's business model here:

• Hulu is the exclusive distributor of ad-supported streaming content from Fox, NBC and any other premium content provider they can sign up.
• The content provider gets 70% of the revenue.
• Syndication partners (e.g., a Hulu channel on YouTube, if that happens) get 10%.
• Hulu keeps 20-30% (depending on if there's a syndication partner).

According to Blodget, the content suppliers have first crack at selling the ads, with unsold inventory bundled into genres and sold by Hulu.  (Ah, bundling - the first of many reasons why the WGA and DGA need to start staffing up on auditors.)

The Fortune article ends with a couple of quotes from CBS' head of digital initiatives, Quincy Smith.  First, Smith says, "The economics have to change."  In other words, Smith doesn't think paying 20-30% of ad revenue for internet distribution makes sense.  Given that Blodget's most recent critique of Hulu's business model ("Hulu: Great Product, Still Screwed") argues Hulu needs to take more than 30%, this could be bad news for the guys who chucked in the $100 mil.

Second, Smith criticizes what we might call Hulu's creative model, it's vision of how the internet and entertainment ultimately converge: "If the web is just another way to watch TV, I think I'm going to slit my wrists." 

This continues a critique Smith began back in September here.  The gist:

• Premium content owners should make sure audiences can find their content "anywhere, anytime on any screen."
• Hulu, therefore, should focus on syndication and waste neither time nor money building a destination
• Audiences (who Smith charmingly calls, "the bulk of God's children") want clever clips and interactivity, not the whole episodes Hulu focuses on delivering.

The bigger question raised by Smith's quote is a creative one: Is the most important thing about the Internet really just that it delivers the same old TV over different pipes?  Or shorter, lower-budgeted versions of traditional TV? 

Or is there something more here, something to invent that uses the unique social and interactive aspects of the Internet to tell stories in new ways?  My view is there is and that, as writers, actors and directors with some claim to authority in the realm of storytelling, it's our job to figure out what it is.  If only to keep Quincy Smith from doing himself in.

Finally, for a short history of the business and a spirited discussion in the comments section, check out the Geek in Chief's take on Hulu in TechCrunch.  Comment #11 is surprisingly vitriolic.

William Morris Launching VC Fund

Focused on "reducing the friction" between Hollywood and Silicon Valley, the William Morris Agency and two prominent VCs - Accel Partners and Venrock - are launching an investment fund focused on digital entertainment, according to the NYT and LAT.

AT&T, an investor in the Endeavor-affiliated Media Rights Capital, is also a limited partner in the fund, apparently looking for opportunities in mobile entertainment and advertising.

Expect the focus to be on technology, not content. Per LAT, the fund "will make investments of less than $1 million in young companies that help foster growth in areas including broadband, wireless, gaming, advertising, entertainment and emerging media platforms."

That said, both Venrock and Accel have invested before in companies producing original content.  Venrock has money in National Banana, which was founded by Jerry Zucker to produce and distribute short-form comedy.  (Check out the site's wonderfully tongue-in-cheek "About" page link.) 

Accel invested in Matt and Ben's Live Planet and On Networks, both also producers of original internet content, as well as in Facebook, which, like MySpace, is a technology company being driven ever closer to admitting it's also a media company and making investments in content.

It will be interesting to see what kind of opportunities this creates for WMA's talent, though finding a Funny or Die for whichever mega-star WMA represents probably isn't the point of the partnership.

In any case, it looks like Sand Hill Road is ready to give Hollywood another chance to demonstrate we understand what a scalable business is -- the difference between YouTube (make billions!) and a web series that 's a hit on You Tube (make thousands!).  And given how internet technologies promise to disrupt the oligopoly of big media, that's a good thing no matter what -- notwithstanding Kara Swisher's justifiable skepticism.