Leasons from Hulu

NBC and Fox's joint online distribution venture, Hulu, provokes me to ponder the lessons the music industry and the record labels could learn from a such an endeavor.

Its inspiring to me to see two huge networks/studios come together to try to tackle the quagmire that is online distribution of video, specifically television and movies. According to TV Week, Hulu CEO Jason Kilar announced that Hulu "had surpassed their financial goals in the first three months" of operation. Kilar announced this news at the National Association of Broadcasters annual conference in Las Vegas today, also noting that in the past 24 months, online viewing of video has increased 300%.

Now with these numbers and the convincing initial success of the Hulu venture, its no question that the internet and personal computers will continue to increase their share as a primary distribution channel. In Hulu's case, I believe their success was found due to the great attention to detail the site exhibits.

The developer team that designed Hulu held the mantra "To help people find and enjoy the world’s premium content, when, where, and how they want to." according to the same TV week report. This mission statement allowed the Hulu developers to put just as much effort and thought into the operation and streamlined qualities of the site as they did the business plan to make this a revenue generating venture. The attention to design, user experience, and easy operation remind me vaguely of another company who has had success in the digital distribution of media...I think their name is Apple.

So what can the music industry gather from this venture?

If its the goal of the record labels to develop and execute an online distribution channel that can compete with Apple's iTunes, they should pay close attention to the methods and ideology developed by Hulu.

NBC and Fox did not consolidate to compete like it is so common amongst the record labels, however they joined forces and collaborated and brought something truly valuable and well thought out to the consumer.

I'm not ignorant to the fact that while its all media, the distribution of video and the distribution of music on the internet differ greatly. To say the least, the cat is out of the bag on music as piracy runs more rampant on music than it does on video. However, it doesn't mean that lessons can't be learned.

The ad-supported nature of the content is what intrigues me most. I think if record companies want to have a chance with competing with "free" than they must lower the cost of music to consumers. However, the profit margins of music could be protected by supplementing this with advertisements.

Variations on this model have been attempted though less than effective music discovery sites such as last.fm, but a true investment into this realm of distribution has yet to be made by the record labels.

In order to survive, the labels need to join forces and actually commit to making a sizeable investment into the arena of digital distribution focusing on adding innovative elements to differentiate from the current offerings. Considering that the labels control the content, this shouldn't be as difficult as they are making it to be. Its time for the labels to stop waiting for someone else to develop it so they can buy it on the cheap, and actually dedicate themselves to solving the problem through collaboration.