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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.
Jobs and Schmidt: Conflicts of Interest
No matter what happens in this race for viewers, Apple co-founder and CEO Jobs won’t have to worry. He has hedged his bets and is safely planted on both sides of the video fence. So is Schmidt, CEO of Google, which owns YouTube. Thus, both have conflicts of interest in their personal portfolios.
Jobs, who’s currently recuperating from serious health issues, sold his Pixar animation studio business to Disney in January 2009 and subsequently became the single largest stockholder of the huge corporation. He now has a stake in Hulu.
Think of those Pixar movies-“Toy Story,” “Finding Nemo,” “Cars” and others-and all the ABC network television shows that will become available on Hulu, competing directly with the iTunes video store. In the long term, if Hulu grows with the new investments, Job’s own iTunes video model stands to lose money.
“Over time, perhaps the direct payment model [will go] away,” Gartner analyst Michael McGuire told BusinessWeek. So Jobs’ conflict is this: He needs to see both iTunes and Hulu succeed, but they are, in fact, competitors.
Curiously, Schmidt-an iTunes competitor through YouTube-joined the board of directors of Apple on April 29. As a board member, he is pledged to help iTunes succeed; as Google CEO, his job is to make YouTube succeed.
It says in the Good Book that no man can serve two masters. Jobs and Schmidt certainly have conflicts, but at this point it does not appear that there is anything illegal about their involvements.
Apple, by the way, had no comment on any of these business shenanigans when eWEEK called to ask. Nor did anybody else.
YouTube Rules Video Land
Meanwhile, iTunes, Hulu and every other player in this sector is currently a long way behind YouTube, the unequivocal master of online video.
Web researcher ComScore reported that Google/YouTube had 40.9 percent of the online video market share in March. Fox Interactive Media was far behind in second place with 3 percent, and year-old newcomer Hulu came in third with 2.6 percent.
Yahoo, which bought Broadcast.com from Mark Cuban in 1999 and made him a multibillionaire, isn’t doing all that well in this market. It had a mere 2.3 percent of the total online video market in March, followed by Microsoft Live with 2 percent.
Can a venture like Hulu eventually catch up with YouTube and become the world’s No. 1 online video entertainment source? Surely it is possible, looking at all the new content Hulu has lined up. Businesses moving at Internet speed can change marketplaces very quickly.
Tune in this time next year and we’ll see how the players-conflicts, drama, and all-line up.