Media’s Darwinian lessons: First Napster, Then DVRs and Now Hulu

I have been listening to Hulu news all week and it is timely because the bulb blew on our 1996 TV and we started debating TV’s role in our life and if we go internet only.  We love netflix streaming for movies and I started thinking about the probability of Hulu continuing to exist as a substitute for general network coverage based on their business model.

I thought about the recent history of broadcast media.  The music industry got sideswiped by Napster which fundamentally changed the distribution model despite being largely sued out of existence.  Overnight music executives lost the ability to influence what was going on with how people consumed their media.  Not only were people no longer paying fat margins to listen to music but they were using a technology that executives had no control over.  They were completely cut out and it took a combination of lawsuits and the white knight of Steve Job’s iTunes store to prove that they could still charge money for music at all and save the industry.

Fast forward as few years to the introduction of the DVR for TV Networks.  Again overnight technology was introduced that disinter-mediated the executives ability to charge for their product.  In the ad supported model if nobody is watching ads then they can’t offer free TV.  I don’t know much of the history with the media executive’s relationship with set top boxes and DVRs but I don’t know of a successful close partnership outside of DirectTV.  That being said I think that DVRs are a transitional technology which is good for the studios because they seemed to have missed the boat.

Having learned the lesson from music that Pandora can not be put back in the box and seeing the streaming video technology on the horizon studio executives adjusted.  Studio executives have taken back control of the viewing experience via Hulu.  They now control the whole distribution channel again.  This gives them the ability to pair websites and their video content and once again show ads.  They are making a ton of money this quarter and yet shockingly the users are happier because they can watch what they want when they want.  Yeah there are a few commercials now if they use Hulu rather than the DVR but they don’t have to set anything up or fast forward so the user experience is probably a push at worst.

The main lesson here is to follow the user’s desired consumption model and adapt the revenue model to fit the new paradigm.  TV seems to have done this fairly well and radio was slow to adapt.  This is directly reflected in the business model changes and ultimately the bottom line and profits.

Back to our household my wife and I had been holding onto this ancient 50 inch TV with less pixels than an I-phone 4 because we wanted to believe that was not the focus of our living room.   After the debate we realized that whether or not we cut the cord we are looking forward to watching Hulu (and even commercials ) on a new 1080 screen.  Whether we cut cable TV or go internet only at least we will get about 6 square feet of floor space back when we get a new plasma so that is progress of another kind.


About svmoneyball

A lifelong student of silicon valley. I also tend to play a lot of Ultimate Frisbee.
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