Hulu Internal Document Leaked, Changes To Content and Service Incoming?

on August 20 2012 1:54 PM

Hulu, the popular television and film streaming service, is changing the way it does business. In an internal document leaked to Variety, the company is not only restructuring, but will also apparently lose some of its most popular content providers. With thousands of television episodes and movies to choose from, diehard Hulu fans will certainly want to take note of the changes outlined in the leaked document.

Chief among the big changes going on at Hulu include the following cryptic statement: "Outline transition plan for new CEO. Discuss potential candidates and process." Jason Kilar, current CEO, has been treading water with the company for the past two years. Kilar, declared a "goner" by a top News Corp executive back in 2011, published a blog entry stating that "Traditional TV has too many ads. Users have demonstrated that they will go to great lengths to avoid the advertising load that traditional TV places upon them. Setting aside sports and other live event programming, consumers are increasingly moving to on-demand viewing, in part because of the lighter ad load (achieved via ad-skipping DVRs, traditional video on demand systems, and/or online viewing)."

Microsoft and Yahoo have expressed interest in purchasing Hulu, along with a few other IPO candidates appeared, as well, but none came to fruition. As part of the potential sale and/or liquidation of the company, content providers are tightening their grasp on their original material. Providers like Fox and ABC are included as stakeholders in Hulu's sale, however; their content is listed as some of the most popular on the site, with hit shows like "Family Guy" and "Gray's Anatomy" being big draws for the service.

The buyout would result in an equity cashout of any high-ranking Hulu executive, Kilar included. This monetary payout has been estimated at around $100 million for someone like Kilar, who has been with the company for a while. Disney and News Corp executives have said that no CEO candidates have been offered the position, but that they need to protect themselves should Kilar choose to step down and cash in his compensation package in the process. News Corp and Disney issued a statement saying "Jason is an outstanding CEO, leading Hulu to exceed our expectations while also uniquely positioning the company for ongoing growth in the long run. We look forward to Jason and Hulu continuing to expand Hulu's reach and deliver increasing value in the future."

Both ABC and Fox will be able to hold back the release of multiple programs, which allows them more time to issue new episodes on their own On Demand media outlets like ABC.com or FOX.com. This leads to non-existent content parity, where, in the past, Hulu had access to everything in the ABC or Fox catalogue, this is no longer the case. As rights-owners, Fox and ABC are able to control and distribute their own material as they see fit. Fox will also increase their current advertising package to include 4 commercials per pod through Hulu. This is sure to generate higher revenue as the two most popular programs in the Hulu lineup are Fox shows.

It seems that Kilar's vision of the future of Hulu might be a forgone conclusion, as the company is currently scouting candidates for the CEO position, as of this past July. A management buyout of the company would result in Kilar potentially stepping down, if this hasn't happened already, and thus would pave the way for the litany of changes on tap for the company, as a while. Changes that include certain programming no longer being exclusive to the service, as well as entities withholding their material in order to bolster their own On Demand outlets such as websites or cable providers.

While none of these decisions are guarantees, the board behind Hulu certainly has a lot on their plate to discuss. While the typical Hulu executive might be expected to leave the company, should the shakeup occur, it is still not a guarantee that Kilar will step down. There are over two million subscribers to the Hulu service, at an average of $8 per month. If Hulu continues on a path of growth, Kilar may see his hard work pay off to higher amounts of money than the $100 million he's rumored to earn should he vacate the company.