Silicon Insider: Will Hulu Replace YouTube?

March 14, 2008 — -- Hello Hulu.

Wednesday may be remembered as the day that the Big Media finally began to understand the Internet.

The occasion was the official launch of Hulu, the new broadband video site created by the partnership of NBC and News Corp. The site has been running in private beta since October (and in sorta semi-public mode for the last month) and has already gained 5 million users. That's a long ways from YouTube's 80 million, but having tried Hulu, I predict that it will catch up fast. (Hulu might even consider "graduating" the best new YouTube videos to its site and paying the honorees for the privilege.)

That's not to say that Hulu will ever supplant YouTube. On the contrary, I suspect that they will ultimately develop an interesting symbiotic relationship with each other, with YouTube being the home of the homemade, the obscure and the populist, with Hulu (or another site like it) aggregating the professional-grade productions from movie and television studios. That's not a bad combination for us consumers.

Needless to say, Hulu also has a very different business structure from YouTube. It is not a "free" site, like YouTube. Nor does it operate like iTunes in which you have to purchase content. No, Hulu is going the Third Way, the one the television world knows best: commercials.

That's sure to raise a groan out there among you readers. But the good news is that, from what I've seen, these commercials -- which run at the usual breaks in shows -- seem shorter (no local spots, like television) and of high quality. You don't like them, but you also don't insanely hate them, like we've come to do with broadcast TV commercial breaks.

What this means, in other words, is that Hulu is trying to find that sweet spot where it can compete with the online content providers, from Apple to the zillions of pirates out there, while still bringing to bear 60 years of market research and tools to maximize revenues. And this is hardly an idle exercise: with 18-25-year-olds turning away from TV toward MySpace and online gaming, the networks are looking at an aging audience -- the kind of folks who most advertisers shun.