hulu v9
TRANSCRIPT
HULU Murali ErraguntalaJosé Enrique Martínez
MTDB 2010
IntroductionMarket and Company Analysis
Correct Definition of the problem
Alternatives and Solution
Action Plan
Market Analysis
Potential Entrants
Supplier Power
Buyer Power
Substitutes
Rivalry
5 Porters’ Forces
HIGH HIGH
MEDIUM
HIGH
HIGHContents Providers
Forward Integration
Traditional TV
More Choice of Product
Less Asymmetric Information
Less Switching cost
TV Industry
Higher CPM
Huge Capital Requirement
Economies of scale
Contents Providers
Market AnalysisMarket Size
130 million unique users who downloaded 10 billion streams$1 billion was spent on advertising
Market Profitability
Market trendsStrong growth in popularity of online video platformsBroadband (75% of penetration )and Mobile industry.
Key success factorsIncreasing the availability of online contentEnhancing the user experienceLeveraging the capabilities of online mediumAbility to create two-sided network
Market Growth Rate
BMG Matrix
Cable TV Public TV
Internet TV
$0,0225
$0,105
$0,015
$0,0225
$0,0225
$0,105
Industry cost structure: Value Chain
$0,15$0,007
5
Software (flash application)
Hardware
Content(70% of Ad Revenue)
Packaging & Hosting
(15% of Ad Revenue)
Distribution & Sales
Revenues at 40$ - 50% per CPM
HULU
Marketing StrategyTargetingSegmentation
Positioning
Differentiation
Product
Price
Place Promotion
TargetSWOT
Customer
Company
Competitors
The market
CustomersCustomers
CompanyCompany
CompetitorsCompetitors
Users, Advertisers and Content Owners
Owners: ABC, NBC, News Corp. and Providence E.P.
Youtube, TV Everywhere, Veoh, TV.com, Metacafe…
The marketStrengthStrength
Weakness
Opportunities
Ability to Leverage online platformOwners Leadership and innovation culture
ThreatsThreats
Unique source of revenue ( ads support)
Advertising market $60B.Broadband and Smartphones (3G and 4G)
Lack of exclusive contractHighly competitive market
The market
PositioningPositioning
AggregatorProfessional contentsFree premium content
DifferentiationDifferentiation
fsdfTargeting
Segmentation
Self-service content distributionAdvertising StrategyHigh Speed internet
usersBase Subscribers
High Speed Internet Users
(40 million)
Base Subscribers(64 million)
Premium Subscribers(41 million)
The market
Product and ServiceProduct and Service
CPM from 40$ to $50.
Price
Place
PromotionPromotion
Embedded professional contents embedded on internetSophisticate advertising tools
Hulu.com and affiliate sites.
Events: Super Bowl; ABC (25M$)…
Company cultureMission: “focus on helping users find and enjoy the world premium , professionally produced contents when, where and how they want it”.Emphasizing frugality, meritocracy, ownership and other key valuesLeadership styleGuide Missile culture (Trompenaars).
Definition of the problem
What are the problems?
TV EverywhereAt least 92% of Americans qualify to watch this for free onlineComcast and Time Warner (70% of the cable market)
Digital ConvergenceUser viewing habits (300 minutes on traditional TV Vs 10 minutes on internet TV)25% less load on internet TV advertising.
What are the problems?
Digital Convergence – Is Industry Ready?Increased viewership by 20%Revenue loss per 1000 viewers for an hourly content on internet TV is 280$ (Approximately)
Suggested Alternatives
Suggested Alternatives
Option 1 – Continue Advertising Model Pros
Advertising markets is 60$ billionHulu can maintain a unique position of offering premium content for freeSame level of offering for all the customers
ConsSingle revenue streamRisk of alienating premium content providers like HBOWindowing issues
Suggested Alternatives
Option 2 – Free + Pay-per-view Model Pros
Dual revenue streamsThis model will be of interest to premium content providers like HBO
ConsHulu will lose its unique value propositionBuyers might not be willing to pay for the same content twiceClear distinction of offerings between free and paid services
Suggested Alternatives
Option 3 – Join hands with “TV EveryWhere” Pros
Hulu can thwart competitionPossibility of exclusive contract with content providersAccess to cable subscribers of Comcast and Time Warner
ConsHulu might become a mere platform that offers online videoValue proposition of Hulu and “TV EveryWhere vary considerably.
Hulu “TV EveryWhere”Target Audience Broadband users (40
million)Cable subscribers (77 million)
Windowing Period Small LargeAds Fewer Same as TVDuration of Ads Shorter Longer
Suggested Alternatives
Option 3 – Join hands with “TV EveryWhere”
Windowing (31%)
Fewer Ads (26%) Picture Quality (22%)
Shorter Ads (20%)
0
1
2
3
4
5
Hulu"TV EveryWhere"
Is “TV EveryWhere” really a threat?
Chosen Alternative
Option 1: Continue with Advertising Model
Business Strategies
International Expansion
Business Strategies
Exploit Long-tailCreate two-sided networksEnhance user experienceContinue innovating new tools like “Hulu Desktop”Make the content available in Mobile and Other Devices
Business Strategies
Targeted Advertisement
Business Strategies
Targeted Advertisements (contd..)
Plan of action
Action Plan
Actions Time Horizon Resources Expected Revenue
Diversification (UK)
6 – 12 months 1 country manager and 2 sales personCost: $250,000/year
24$ million
Market Penetration
6 – 12 months Advertising Manager(s) from traditional TVCost: $300,000/year
40$ million
Thank you
FinancialsDiversification
USA statistics after 1 year of inceptionUnique viewers/month: 40,000Average minutes viewed per month: 60 minutes.Total TV viewers: 110 million
In UKTotal TV viewers: 30 millionExpected statistics after 1 year of inception in UKUnique viewers/month: 10,000Average viewership/month/viewer: 60 minutes
So the average revenue per viewer per month is $200.So the total revenue is 10,000 * 200 * 12 = 24$ million
FinancialsMarket Penetration
Hulu is currently using only 60% of the advertising inventory.
Our strategy is to increase the usage by 20%Hulu.com. For this purpose, we would wish to hire advertising managers in traditional TV who has better relationship with advertisers. 120$ million revenue in 2009 with 60% usage of advertising inventory. With 20% increase, we can increase the revenues by 40$ million.