Could the Hulu, Disney Deal Create a Tangled Video Web?

Competition in the television- and movie-fueled online video streaming business is getting more and more intense. And the personal involvements of Apple co-founder Steve Jobs and Google CEO Eric Schmidt in this burgeoning market complicate the story to the point where it resembles a made-for-TV movie.

There's a premium on high-end TV and movie content, and the battle for the good stuff appears to be getting very serious, because the big-bucks people are writing checks for their stakes. And some of the internal powers behind these battles appear to have real conflicts of interest to smooth out.

Let's start from the beginning, shall we?

For most of this decade, YouTube and its free-for-viewing—and mostly amateur-created—fare has been ruler of the online video universe, particularly since it was acquired by Google in November 2006 and infused with a rather plump $1.65 billion investment. Fox Interactive and CBS.com are smaller players here.

Apple's iTunes, the online leader in music sales, also has been important in the video marketplace, although its pay-per-download model is vastly different from YouTube.

Now comes a brash newcomer, Hulu, which is starting to make this a new dance. Hulu, which in Mandarin means "holder of precious things," was launched in March 2008 and already holds a lot of sought-after video content, featuring shows from NBC, Fox, Comedy Central, PBS, USA, Bravo and about 100 other networks. All these sites also earn revenue from ads that run in conjunction with this programming.

Hulu distributes video both on its own site and syndicates its hosting to other sites. It also allows users to embed Hulu clips on their Websites.

Hulu soon will be holding even more of the good stuff. It made news April 30 when entertainment giant Disney wrote Hulu a large check to become a 27 percent equity owner.

Upon completion of the Disney deal, Hulu will display current and archived Disney and ABC programming, including hit shows such as "Lost" and "Desperate Housewives" and a list of classic movies.

None of this is good news for iTunes, as its pay-for-play model may find itself in serious jeopardy. No one wants to pay for shows they can get free elsewhere. For example, a fan of the hit TV detective show "Monk" has to pay for an iTunes download; it's free on Hulu.

Next: Jobs and Schmidt: Conflicts of Interest >>