The Goliath that is YouTube is without a close competitor when it comes to viewer numbers. But could the David of Hulu be about to beat it where it matters: in the pocket?
But while viewers are important in this business, any company ultimately lives or dies by the amount of revenue it can make, and how much of that revenue ends up as profit. And on this score, YouTube has a keen competitor.
Hulu On The Rise
Hulu has only been open to the public for a year, and even then is only available to viewers in the U.S. thanks to those always present territorial rights licensing issues. But it’s already making huge progress where it matters most, with profits set to soar in the coming years.
Screen Digest analyst Arash Amel has forecast that YouTube will generate around $100 million in profit in the U.S. during 2008, while Hulu will manage around $70 million. Which for companies as far removed in terms of traffic numbers as these two is pretty astounding. But it gets better.
Equal In 2009
Amel tells The Financial Times that he predicts both sites will make the same, around $180 million, in 2009, despite YouTube managing over 80 million unique visitors per month compared to Hulu’s 6 million.
“YouTube is in a very tough place right now. Most of that user-generated content is worthless or illegal. The next 18 months will determine whether or not it was just an expensive mistake for Google.”
The Problem With UGC
The analyst hits the nail right on the head, that user-generated content is ultimately useless despite being what YouTube was initially built upon and is now famous for. The problem is that the vast majority of UGC cannot have advertising sold beside it.
Due to the risk of UGC videos containing copyrighted material, Google is unwilling to sell advertising, and companies are unwilling to buy advertising against them. In real terms this means only around 3% of the videos uploaded to YouTube can be used for advertising purposes.
Professional Content Is The Future
Compare this situation to Hulu which has only professional content from the likes of NBC and FOX, and can therefore sell advertising on every single video clip, and you see how the numbers are stacking up as they are.
Google has of course been throwing the kitchen sink at YouTube in recent months in an attempt to make the site profitable, but the fact it’s trying to woo companies such as MGM, CBS, and Lionsgate indicates even it can see the future is not UGC.
The Next Challenge
The sky is the limit for Hulu but to actually become the number one video sharing site in the world for both traffic and revenue, it’ll have to welcome more than just U.S. viewers. That’s the next challenge.