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Fall TV's Biggest Hit: HULU

Published: Tuesday, 8 Sep 2009 | 10:27 PM ET

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By: Julia Boorstin
Correspondent

CNBC.com
The fall TV season starts this week and this year it'll be easier than ever to find all that content online-on Hulu.

I sat down with Jason Kilar, the CEO of the two-year-old startup to hear where he thinks the company-and the industry-is headed next.

Hulu was co-founded by NBC Universal [GE Loading... () ] and News Corp [NWS Loading... () ] back in 2007, but it seems getting Disney [DIS Loading... () ] on board as another co-owner was a major turning point for the company. Now Hulu has nearly the entire primetime lineup, plus much more from its 200 content partners, including plenty of premium content from cable channels like Viacom's [VIA Loading... () ] Comedy Central.

It's working: in July, the first month Disney's content was included, Hulu attracted 38 million viewers, according to Comscore. That's more than the 34 million viewers of Time Warner Cable. Yes, it's apples and oranges to compare one of the nation's major cable providers to a web service that's free, ad-supported, and accessible to anyone with broadband. But the comparison gives a sense of Hulu's scale and the fact that watching videos online is now mainstream.

Advertisers seem to agree. Hulu has over 200 Fortune 500 advertisers, from GM to McDonalds, to Microsoft, which used Hulu as a centerpiece of its campaign to launch its Bing search engine. Hulu takes an approach of less is more: put fewer ads on each TV episode and charge advertisers more for those ads. And Kilar tells me it's working in that Hulu has an ad recall rate that's twice that of other online video sites. He won't tell me how much Hulu charges for its ads; he acknowledges that it's definitely a premium to other online video ads though not double. And advertisers are willing to pay for that recall rate and the ability to target based on the type of content.

On CNBC.com now:

But what about Google's YouTube [GOOG Loading... () ], which is still the largest player in the online video space? YouTube continues to add a growing library of professionally-created content and form new relationships with content providers. And YouTube also has a growing variety of ad inventory for potential marketers as it puts ads on more user-generated content. Kilar insists he's not threatened and that these are very different business models. We'll see what happens if YouTube starts streaming full-length films.

It seems Hulu's next frontier is cable. Kilar points out that since Hulu drives demand for broadband service it could be a natural partner for cable and broadband providers like Time Warner Cable [TWC Loading... () ] or Comcast [CMCSA Loading... () ]. Hulu would also like to be the destination for password-protected cable content just as it is the go-to-site for the content from the first couple of numbers on the TV dial. When Time Warner Cable announced its test of a "TV Everywhere" concept that will allow subscribers to access content on demand, online, it made it clear that Hulu could be one destination for subscribers to plug in their passwords and access those shows. Hulu's already in talks with Time Warner Cable; the challenge will be getting rivals in this space to agree to work through Hulu just as the broadcast companies have. What about the fact that Hulu still doesn't have CBS on board? Kilar tells me he's working on Les Moonves.

We'll see if he can convince him, and in the meantime it doesn't seem to be hurting Hulu's growth.

Questions? Comments?

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