Anyone seriously considering a $2 billion deal for Hulu will want to know it has a future beyond just distributing TV from networks such a ABC, NBC, Fox and Comedy Central. As Fox showed last week when it pushed its distribution window to Hulu back eight days, those deals come with strings and there is no guarantee they'll be renewed when they expire.
But Hulu is taking its first tentative steps away from being only a passive distributor of TV and movies to becoming a programmer. Case in point: Today it announced it has acquired its first long-form series, "Day in the Life," created by filmmaker provocateur Morgan Spurlock. Hulu is buying a six-episode "season" of the series, each installment chronicling 24 hours in the fabulous life of a well-known or interesting personality.
The first episode sets a pretty high bar when Mr. Spurlock trains his camera on entrepreneur and Virgin Group CEO Richard Branson, who in 24 hours has dinner with the Queen, opens a new Virgin America route to Chicago and declines to serve on the board of a charity pitched to him by actor Adrian Grenier. In other words, stuff that could air on just about any ad-supported cable network.
Subsequent episodes will feature Black Eye Peas frontman Will.i.am, comedian Russell Peters, musician Girl Talk and others. The show will be available on both the free Hulu service and its subscription service, Hulu Plus .
More interesting than the series itself, though, is the strategy it represents: a tiny separation between Hulu and the TV networks that control most of its content and all of its future.
Until now, Hulu's original-content efforts have been restricted to licensing a few odd shows for a period of exclusivity, or short-form web series. With Hulu's latest content deal it owns the series, keeps 100% of the ad revenue it generates and is free to syndicate it to other distributors, such as iTunes or even package it as a DVD. Hulu did not disclose terms of the deal but said it includes a license fee plus additional bonuses for Mr. Spurlock and his production company if certain viewer and advertising targets are met.
The point here is Hulu keeps the vast majority of the ad revenue, rather than passing 70% to 75% back to the network that owns the show, as it does now with ABC, NBC and Fox.
Andy Forssell, senior VP-content acquisition at Hulu, said the company is very much in the content-acquisitions business, albeit on a much smaller scale than the broadcast networks or, say, Amazon, which paid an estimated $100 million for online streaming rights to the full seasons of 18 series from CBS, including "Cheers," "Star Trek" and "The Tudors." "We don't have a quota or hours to fill but we have a number of things in the pipeline," he said. "Ad revenue and Hulu Plus subscriptions allow us to do more with a dual revenue stream."
Mr. Forssell said that while Hulu will be doing more content deals, they won't be big. Hulu isn't trying to become HBO, which now relies heavily on original content; rather it will remain a mix of originals, licensed shows and content deals with 260 other partners, the biggest of which are also its owners, Comcast, Walt Disney and News Corp. "We are a lot less likely home for the next Warner Bros. sci-fi series that costs $3 million an episode for production, but we are doing a lot of things in original content and we will go further," he said.
