Should Hulu launch in the UK?

Last week, reports suggested that NBC Universal and News Corp’s US Online TV platform Hulu was about to launch in the UK – an established model that works and could hit the ground running would surely benefit the UK market, wouldn’t it?

The two US-based broadcasting giants are keen to monetise the UK’s VoD space, and it doesn’t seem to be coincidental that talks of a potential launch follow the Competition Commission’s ruling to block Project Kangaroo.

In February, the Commission concluded that the joint VoD venture between three of the main UK broadcasters, BBC Worldwide, Channel 4 and ITV, would “restrict competition” in the UK, and would be “likely to result in a substantial lessening of competition in the supply of UK TV VoD content” (see Competition Commission “stops” Kangaroo).

At the time, the Competition Commission’s chairman Peter Freeman, said: “After detailed and careful consideration, we have decided that this joint venture would be too much of a threat to competition in this developing market and has to be stopped.”

According to the Commission, the key problem with Kangaroo was about the control of valuable UK-originated TV content.

“BBC Worldwide, ITV and Channel 4 together control the vast majority of this material, which puts them in a very strong position as wholesalers of TV content to restrict competition from other current and future providers of video-on-demand services to UK viewers,” said Freeman.

In response to the Commission’s decision in February, the shareholders of Project Kangaroo said: “We are disappointed by the decision to prohibit this joint venture. While this is an unwelcome finding for the shareholders, the real losers from this decision are British consumers.”

British consumers would therefore surely welcome an established VoD service, which holds vast amounts of content and has a proven track record among US consumers.

Hulu, the ad-supported service that was launched by NBC Universal and News Corp in 2007, is now “performing phenomenally” in the US and is generating more ad revenue than YouTube, according to Rhys McLachlan, head of broadcast implementation at Mediacom.

The online TV platform currently offers programmes such as The Simpsons and The Office, and has US distribution deals with Dailymotion, MSN and Yahoo!, but is only available in the US.

However, Hulu was always expected to expand internationally and “anticipated to launch in the UK some time this year”, according to McLachlan, who has, along with his team at Mediacom, been monitoring the growth and success of Hulu in the US for a while now.

“By the Competition Commission terminating Project Kangaroo, they were effectively giving the green light for Hulu to launch in the UK,” he said. “It’s an open space and they have a proven track record so it makes sense.”

However, it may make sense for NBC Universal and News Corp – as it would potentially significantly increase their revenue and could also create opportunities for the service to expand in the international VoD market, particularly in Europe, but what does it mean for British consumers?

The main question is, whether Hulu would be constrained by the same rules that govern the UK market and would therefore be subjected to approval by UK regulatory bodies – or would it be similar to Google, in the way that it has been allowed to dominate the UK search market?

This means that it could potentially become a main player in the UK VoD market as a content aggregator, which is precisely why the Competition Commission blocked Kangaroo.

“This is why the Competition Commission’s ruling was astonishingly short-sighted,” McLachlan said. “As a UK consumer, it’s frustrating because UK broadcasters and content providers could offer the same service.”

McLachlan predicts that Hulu will already be engaging with UK broadcasters, such as the BBC and ITV, to expand its UK-based content.

This seems like an obvious step, if it is to be as successful in the UK as it is in the US.

“Hulu will expand with UK broadcasters, offer them a revenue share and do content deals with them,” McLachlan said. “It makes sense and it will almost definitely involve the BBC, as it’s part of their remit to make content available in as many places as possible.”

So, as far as the consumer is concerned, they will be offered a similar service to Kangaroo – a one stop shop for VoD – and advertisers will still have greater opportunities to reach this audience, so perhaps it’s just the UK broadcasters who will lose out, especially in terms of revenue.

However, if Hulu proposals to launch go ahead, at least the risk element is removed and the UK-based broadcasters can save their financial investment for other opportunities – and broadcasters who were opposed to Kangaroo, such as Sky, can re-focus their rivalry.

“It’s not the end of the world. Hulu will be able to hit the ground running over here, which is a good thing for UK consumers,” McLachlan added. “It’s an exciting thing for the UK market, Hulu has a proven track record and if it signs up the right UK content, it will be a good consumer product.”