Hulu CEO Jason Kilar announced in a blog on Friday that he'll be stepping down in the first quarter. While the news was not unexpected, the timing was certainly a surprise.
Rumors started circulating in August that Kilar was on his way out. But the announcement came just days before the Consumer Electronics Show, where Hulu was expected to showcase its Hulu Plus app and its range of original content, and feature the fact that the subscription product is available on nearly every new device at the show.
Why is Kilar leaving?
The process started in October when Providence Equity's stake was bought out by the company's other owners—Comcast, News Corp. and Disney —which opened the door for Kilar to sell back his stake in the company, worth about $40 million. (Read More: Who Is Jason Kilar?)
Kilar and Hulu have had no shortage of drama—most notably in 2011, when Kilar wrote a controversial 2,000 word blog post about the future of television, which opaquely criticized some of the strategies of his media parent owners.
There have been reports that Hulu's employees are frustrated because they're being paid with cash and not stock. The company was put on the auction block this summer, but didn't find a buyer at the right price. And running a company run by two of the biggest media giants (Comcast owns a stake but doesn't have a vote, as part of the terms of its acquisition of NBC Universal, CNBC's parent company), which needs to license content from all the other media companies, is a complicated venture.
Kilar leaves quite a positive legacy—in the five and a half years he spent at the start-up, he transformed it from a joke, nicknamed "ClownCo," to a digital content powerhouse. (Read More: Digital, TV Increasingly Hand in Glove: Pro.)
Last year the company generated nearly $700 million in revenue, up 65 percent over 2011. Its content library grew 40 percent and it generated more than $1 billion in revenue for its content partners. Its premium subscription option—which makes the app available on TVs and mobile devices—has been on fire. Kilar said in his farewell blog that it has added over 200,000 new subscribers in the past 7 days alone, a new record.
What now for the company?
There has been speculation that News Corp. or Disney would buy out the other company's stake. The two media giants have divergent visions for the company's future—Disney's more committed to the ad-supported Hulu.com, while News Corp is more interested in the paid Hulu plus app.
And the rise of "TV Everywhere" apps, which give cable and satellite TV subscribers access to their library of content from wherever they are, raise questions about what purpose Hulu serves for people who are not cutting the cord, a trend that its media giant parents certainly don't want to encourage. One idea: have Hulu serve as the universal authentication portal for all cable and satellite TV companies' TV everywhere options. (Read More: The Future of TV Is the Internet: Roku CEO.)
Who will replace Kilar?
There is one likely candidate: veteran digital media executive Ross Levinsohn. He's been scouting out his next move after leaving his position as interim Yahoo CEO when Marissa Mayer took over.
—By CNBC's Julia Boorstin; Follow her on Twitter:
Note: Comcast is the majority owner of NBC Universal, the parent company of CNBC and CNBC.com.