Hulu's profitable, but direction still uncertain

Video site posts two profitable quarters and raked in $100 million last year. But questions remain about Comcast's role, pay walls, and unhappy content partners.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Greg Sandoval
2 min read

One of the most closely watched races in online video the past two years has been between Hulu and YouTube, and it appears Hulu has just earned some bragging rights.

Hulu CEO Jason Kilar Greg Sandoval/CNET

In a New York Times interview, Hulu CEO Jason Kilar said the streaming video service has posted profits in two quarters (though he provided few details). Kilar also said that revenue surpassed $100 million in 2009.

Profits are a significant benchmark for the company, jointly owned by News Corp., NBC Universal, and Disney. Two years ago, Google's YouTube reigned over online video nearly unchallenged. YouTube employees snickered at the tech efforts by old-media companies, calling Hulu the "clown company." Then Hulu got off the ground, and the laughing stopped. Hulu offered lots of popular full-length TV shows in much higher quality video than YouTube.

But two profitable quarters don't mean Hulu has won the race. It's direction, for one, is unclear with Comcast trying to acquire NBC Universal and with News Corp.'s Rupert Murdoch wanting to establish a pay wall at Hulu.

Hulu also lost some luster when word came that some content partners weren't happy with the money they were seeing. For example, Viacom has yanked "The Daily Show," "The Colbert Report," and other popular content.

Hulu's offering also isn't in the center of the ring. The television set is still consumers' preferred machine for watching full-length content, and any online video player worth its weight in iPads will stream video to a TV.

Netflix helped set the standard by partnering with the Microsoft Xbox, Sony Bravia televisions (which connect to the Web), and the Roku Box. They all enable Netflix users to watching video streamed from the Internet on their TV sets. By contrast, Hulu's leaders have dragged their feet on this, going so far as thwarting Boxee's attempts to sling Hulu's content to sets.

As far as the competition is concerned, Google CEO Eric Schmidt suggested earlier this year that YouTube might be profitable in 2010, but Google doesn't break out numbers from its individual business units unless they are "material" to earnings. YouTube undoubtedly is a long way from generating money that is "material" to Google. The company's revenue last year was $23 billion.

Still, YouTube, the Web's No.1 video site, has more than 100 million viewers each month--far more than Hulu--and has been raking in big money for ads lately, according to reports.

YouTube has also won over a number of large content partners, including MGM, Sony Pictures, and CBS (parent company of CNET). However, full-length, premium content, the kind that attracts lots of viewers in the TV realm, is still scarce.

What this means is that Hulu and YouTube still have many miles to go before a real winner can be declared.