Hulu CEO Jason Kilar Abruptly Leaves as Web TV Startup Faces Impasse

Both CEO and Chief Technology Officer Leaving in the First Quarter

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Jason Kilar, the former Amazon exec who launched Hulu in bid to re-invent TV for the web, abruptly announced Friday that he will leave the company in the first quarter of the year.

Jason Kilar speaking to the crowd at the Ad Age Digital Conference in 2012
Jason Kilar speaking to the crowd at the Ad Age Digital Conference in 2012

The decision came as little surprise to staff; Mr. Kilar had long had a difficult relationship with Hulu's backers -- ABC parent Walt Disney Co.,, NBC parent Comcast and Fox parent News Corp., who pushed for more revenue and increasingly pulled shows off Hulu when they could make more money elsewhere as part of their "windowing" strategy.

Competing with the likes of Netflix and Amazon is getting more expensive and Mr. Kilar was looking for increased investment to pay for programming. The WSJ reported in December Mr. Kilar asked had asked the board for an additional $200 million to acquire programming and finance expansion in 2013. An exec with knowledge of the talks told Ad Age the board has not yet made a decision on the request.

When the idea for Hulu was hatched in 2007, YouTube and short clips were ascendant and past web TV failures like Joost and Veoh were fresh. Many in the media and tech punditry concluded that viewers had no patience to watch full-length TV on the web. Even before Hulu had a name, the critics gave it one: "ClownCo."

Mr. Kilar alluded to that time in a note to staff about his exit:

In the weeks afterward, some brave souls that were willing to look past the many naysayers and ClownCo moniker jumped aboard and got about the business of innovating and building. Five and a half years later, thanks to the missionary work of this amazing 600+ worldwide team and courageous, prescient partners, we are fortunate to have collectively built a culture that matters, a brand that matters, a business that matters.

But what the world learned from Hulu -- or at least more from Hulu than any other service -- is that they love TV, and especially love to watch it on their own terms and in venues other than traditional TVs, like computers, phones and tablets.

As he brought TV to digital media, however, Mr. Kilar was determined to leave certain aspects of the familiar TV experience behind. More than anyone, he was champion of the user experience on Hulu, which meant resisting when its network backers wanted to increase ad loads to TV-like levels. But in pushing back, Hulu never generated the revenue its owners hoped for, one reason that Mr. Kilar regularly took pains to tell the world how Hulu's business was doing. Last month, Mr. Kilar said Hulu would generate $700 million in revenue.

In his exit memo, he reiterated that achievement:

We have grown from a few hundred thousand in revenue in 2007 to generating almost $700 million in revenue in 2012 alone. We have created a video subscription service that is growing unusually fast, adding over 200K new subscribers in the past 7 days alone (a new record). We have proudly generated over $1 Billion for our content partners since we excitedly entered private beta in October 2007.

Mr. Kilar delivered the news to staff at a short-notice all-hands meeting, joined by video from remote offices. He published his note on Hulu's blog a short time later.

The departure of Mr. Kilar comes at a time of strategic impasse for Hulu. The more successful it becomes, the more it comes into conflict with the interests of its main content partners and owners: ABC, NBC and Fox.

At the same time, Hulu is considered an important traditional-media hedge on the future of TV, where new delivery systems and business models will transform -- and perhaps erode -- the broadcast and cable models which have dominated media for 50 years.

News Corp. CEO Rupert Murdoch indicated Friday that Hulu has a bright future. "Jason and his team have done a great job building Hulu into one of the leading online video services available today and it's incredibly well positioned for the road ahead," he said in a statement. "We are grateful for Jason's leadership and wish him the best on his next venture."

The precise contours of the road ahead, however, will get harder to discern as Mr. Kilar leaves. The media companies that own Hulu can't very well sell it without including long-term contracts guaranteeing access to their programming. But the networks also distribute their content on the web through their own sites and apps, where any ad revenue they earn is theirs alone to keep.

Like Netflix, YouTube, Amazon and others, Hulu is investing heavily in original content in hopes of creating unique value and diversifying revenue away from distributing TV content. It has also built a pay service, Hulu Plus , that brings in subscriber fees, emulating cable TV's dual-revenue stream model on the web.

Hulu has also pushed hard to bring the service to TVs themselves through deals with game consoles like Xbox and set-tops like Roku and Apple TV as well as tablet apps.

The success of Hulu has made Mr. Kilar an intriguing figure in both the tech and media worlds. He was considered as a candidate for CEO of Yahoo, but he publicly removed his name from consideration on July.

Mr. Kilar gave no reason why he's leaving Hulu; no successor has been named.

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