Ever since it arrived on the scene three years ago, Hulu has always seemed a little too good to be true: a high-quality streaming- video site with tons of free TV shows and movies and minimal advertising.
Of course, it was too good to be true, or at least too good to last. The reality check started last year when an executive from News Corp. (NWS), which co-owns Hulu along with NBC Universal (CMCSA) and Disney (DIS), said the plan was to start charging viewers for some content. It continues this week with the news that two of the site's most popular programs, The Daily Show and The Colbert Report (pictured), are going away, perhaps never to return.
Both shows air on the Viacom-owned Comedy Central. Viacom (VIA) isn't a partner in Hulu, so Daily and Colbert appeared on it only thanks to a rights agreement, which expires next week. The two sides were unable to agree on terms for an extension, apparently because Viacom was asking for a more generous split of advertising revenue than Hulu was willing to provide.
Narrow Window for Viewership
It's a bit of an anomaly that either show ever made it onto Hulu in the first place. Generally, cable networks are reluctant to put their shows online for free for fear of antagonizing cable providers, who pay dearly for the right to carry their programming. That's why Comcast and Time Warner (TWX) are launching an initiative called TV Everywhere that allows paying cable subscribers -- and only paying subscribers -- to watch cable programming on any device they choose.
But Comedy Central says Daily and Colbert differ from most cable programming in that they're so time-sensitive. Viewers who don't watch an episode within a day or two of its original broadcast are unlikely ever to see it. So the network's strategy for the shows has been instead to maximize distribution within that window.
The decision to remove the shows from Hulu represents, to some degree, a reversal of that strategy -- or at least a gamble that the viewers who watched them on Hulu will make the trip to the shows' homewebsites, where they'll still be streamed online for free, and where Viacom will get to keep all of the ad revenue they generate. Certainly, both shows have extremely loyal followings, as Hulu executive Andy Forssell acknowledged in a blog post bidding them farewell for now.