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Fox CFO: Hulu Is Not a Repository for Content

10 Mar, 2015 By: Erik Gruenwedel

Among domestic subscription streaming services, Hulu Plus is billed as a competitor to Netflix and Amazon Prime Instant Video. That strategy is as important to 21st Century Fox CFO John Nallen as the SVOD service being a compelling consumer business.

Hulu (and Hulu Plus) is co-owned by The Walt Disney Co., Fox and Comcast.

Speaking March 10 at Deutsche Bank Media, Internet & Telecom confab in Palm Beach, Fla., Nallen said Hulu is good for the market as a buyer of content, including original programming. It is not, Nallen reiterated, a repository for content unable to find a greener pasture elsewhere.

“Having three major [SVOD] competitors available to buy our product creates a healthy tension in the marketplace,” Nallen said. “But it’s not what we look to Hulu to be. We look at [it] to be a robust consumer experience.”

The executive said Hulu has engaged in an extensive brand marketing campaign to reiterate how different it is from the traditional broadcast product.

“Hulu provides an elegant way to consume product compared to a linear TV experience, which is a little cluttered,” Nallen said. “At the heart of it, we’re focused on Hulu as a business, and not as a place for us to sell content.”

Part of that experience to Fox is selling advertising. Hulu, unlike Netflix and Amazon Prime, inserts ad spots in programming. Nallen said that with on-demand viewing split evenly between DVR and VOD services and related TV Everywhere apps, marketing ads to VOD that is different than linear TV — the latter involving 16 minutes of ads for every hour of programming.

The CFO said Fox’s recent acquisition of digital ad technology firm TrueX was done to evolve the way online viewers are subjected to advertising. Indeed, the new technology allows online viewers to choose how they want to watch ads, including answering questions about products.

“What we have to do is marry that ad with data and insertion technology so … we’re able to insert the ad at the right time,” Nallen said. “The biggest mistake we as an industry could make is recreating the linear [ad] experience on VOD.”

Meanwhile, in the crush toward direct-to-consumer streaming video platforms, scuttlebutt suggests the traditional premium channel bundle is toast. Not so, said Nallen, who contends pay-TV will not only survive, it will be emulated by an emerging bundled-channel OTT video market.

Nallen said pay-TV subscriber losses in 2014 were “tiny” compared with past years. He said that at $3 a day, the current multichannel cable/satellite/telecom distribution universe remains a compelling product to consumers.

“[This] speaks to the resiliency of the bundle,” Nallen said.

As a result, Fox looks at the emergence of OTT video not as a threat to pay-TV, but rather subsidiary distribution targeting a broadband-only market Nallen said will eventually reach 20 million.

While a-la-carte OTT video ventures proliferate, the rise of bundled OTT services such as Sling TV and Sony’s pending PlayStation Vue will emerge as a better deal, according to the CFO.

“What we see are two [distribution] tracks. And our job is make sure our bundle [Fox News, Fox Sports, FX, Fox broadcast, etc.] is carried in both,” Nallen said, adding that regional sports networks will factor significantly in OTT video bundles going forward.


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