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Hulu Supply Chain

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Hulu Background
Hulu offers a range of hit TV shows, movies, and clips. It was founded in March 2007 and is owned jointly by NBC Universal, News Corp, Walt Disney, and Providence Equity Partners, but is operated independently of either individual company. The company’s extensive supply manages to deliver more than 2,600 shows, both current and classic, by consolidating the content of over 225 individual companies. Achieving such a large selection across a wide variety of networks is one of Hulu’s main advantages.
On the Hulu board of directors sit representatives from all the four companies mentioned above, along with independent Hulu director and CEO Jason Kilar, formerly of Amazon.com. Although the parent companies have board representation, the parent firms are in competition with their own offspring, since Hulu is outperforming the individual networks’ own online video services. This has raised concerns among critics of Hulu’s corporate structure to deem it as fundamentally flawed.
Hulu itself considers its main competitors to be various “piracy services”, such at PirateBay.com with other peer-to-peer sites and independent legal streaming sites, such as Justintv.com. This is a hint at the position Hulu has gained today, where it’s diversified television content seem to be hard to challenge by legal means. The main threat to Hulu, however, might in fact come from inside the business model itself,
Hulu’s main source of revenue is advertising sales. The video you are streaming occasionally gets paused to make room for ads of varying lengths. Hulu also charges subscription fees for Hulu Plus (now at $7.99 down from $9.99), a service that allows access to even more videos, especially older classic movies and popular subscription network programs with limited commercial interruptions. The revenue from the advertising is then shared between the content suppliers and Hulu.

The increased popularity of legal streaming content sites brings two fundamental changes. First, consumers no longer need to subscribe to individual networks to enjoy certain television shows now offered in one location. Second, consumers are becoming masters of their own time. As services such as Hulu continue to expand, the act of tuning in for a program’s specific airtime becomes irrelevant. Additionally, identities of networks become blurred, as consumers become Hulu viewers, not Fox or CBS only viewers.
The significance of Hulu and similar firms extend into areas such as the DVD industry. Since serial content is readily available at Hulu for no charge or a modest monthly subscription fee, the incentive to buy an actual DVD collection becomes weaker. The effects of the expanding presence of online content, legal as well as illegal, have already been seen in the past decade, manifested in the demise and bankruptcy of businesses such as Hollywood Video.
The natural conflict between the four owner-parent companies contains a fragment of the potential conflicts Hulu faces with regards to its other 225 content suppliers. These organizations are not so deferential in accepting Hulu as the aggregate content leader. Large contributors like Fox and NBC have considered pulling shows from Hulu, likely an effect of Hulu cutting into the networks’ own sales. Furthermore, a potential IPO from Hulu has been delayed because of contract issues with its collaborators. It seems Hulu’s main advantage is also one of its most evident vulnerabilities; the service brings together the resources of many networks, but at the same time becomes uncomfortably reliant on their cooperation. If Hulu’s competitors/collaborators start delaying their video deliveries, and publish the content on their own sites instead, Hulu will clearly become a secondary choice for consumers looking for particular television shows. Hulu is thus running the risk of being outmaneuvered by its own supply chain, a serious threat to the company today.
Hulu seem to be doing well. It made $260 million in revenue 2010, and its users watched twice as many hours of video as on the sites of the next five major networks (ABC, CBS, NBC, Fox, and CW) combined. Apparently the idea of a ’content aggregator’, as Hulu profiles itself, appeals to the consumers.

The Chain
Accessing the consumer content supply stream is easily accomplished with an Internet connection and any Internet compatible personal computing device. Any person from any location may view Hulu content by going to www.hulu.com and selecting a program to view. There is no registration fee requirement for standard Hulu service, although registration is required to access age restricted appropriate content. The figure below demonstrates the Hulu value chain.
The value chain retains the same configuration with Hulu+ content subscribers.

Comparisons A comparison chart below describes the offerings of Hulu & Hulu+.

Competition
Concerns by other streaming video providers of Hulu going head-to-head in entertainment content competition may be premature. Hulu directs most of its content offerings at broadcast television viewership. Companies such as Netflix, which offer a popular streaming service concentrate on feature length films. Hulu has been very careful to limit its offerings in movie content to classic noir cinema from the Criterion Collection, as well as “B” run esoterica films and full length features from subscriber networks (HBO, FX, SyFy, Showtime). In this respect Hulu is positioned to offer a niche movie service without having to compete for market share in the extremely competitive and volatile first run feature venue.

According to Trefis.com, a tech financial investment report service, “Hulu’s traffic has risen significantly over the past few years, reaching 813 million unique streams in May 2010. But unlike Netflix, Hulu has not penetrated the video rental market. In order to lure customers away from Netflix, Hulu will need to enlarge its content pool, determine the right type of content for its audience, and deliver content to gaming devices (PS3, Xbox 360, Wii).”

iTunes

Background iTunes was originally developed by Jeff Robbin and Bill Kincaid for Casady & Green in 1999 as SoundJamMP and then acquired by Apple in 2000. The product was redesigned and debuted at MacWorld in San Francisco in January 2001. In April of 2003, Apple introduced iTunes for Microsoft Windows and the iTunes Store, and by January 2008 added iTunes Extras to support DVD video and Blu-ray formats. In March 2010 iTunes included support for iPad and iBook applications and by June 2010, iTunes was fully compatible with iPhone 4 and Windows Server 2008.

The Chain
David Blanchard asks this question in Industry Week, May 30, 2008, “How much of Apple’s performance can be attributed to its supply chain? What’s the “supply chain,” for instance, of an iTunes? Apple sells more than 1 billion songs per year off iTunes, with no perceptible supply chain to speak of, at least in terms of a physical product changing hands.” Indeed, what are the perceptible goods and services that has single handedly reshaped the world’s entertainment infrastructure? The goods and services are found in your smart phone, your personalized audio and video player, and your personal computer: they are time and demand. As our growing technology allows us to be more mobile, so must our diversions that we access via our technology. In creating the iPod, Apple opened a new market for content distribution and shattered an established model, the record store. iTunes is essentially three venues under one corporation. First there is the application that bears its name, iTunes is also the store - the revenue stream, and iTunes is in the “cloud”, a virtual storage system that only registered users may access that supports all other non-traditional PC related products without having to have the storage capacity at the home or office.

Content within Apple’s iTunes Store, is very extensive. Offerings range from Music (#1) to Movies, TV Shows, Apps Store (#2), books, Podcasts (#3), and iTunes U (Apple’s no cost college lecture circuit). Licensed major content providers prepare their offerings as audio or video MP3, AIFF, WAV, MPEG-4, AAC (.m4a), QuickTime and Apple Lossless files that are retained on Apple’s servers or on licensed content distributor servers. These files are accessed via the iTunes application and then retained in some fashion by the end user for the stated period of content terms. For example: audio, Podcasts, books, and apps have indefinite expirations. Movies have 30 days/24 hours. This means a movie may be rented and downloaded at anytime, held for up to 30 days, but must be watched within 24 hours of initial viewing. Content is the very lifeblood of the iTunes enterprise. More single content is found on the iTunes system than all other content providers combined, and this is why iTunes is an international success. Content is so easily imported that Apple has developed simple, streamlined on-line applications for submission that anyone can complete and begin offering product as an affiliate if that they hold copyright and distribution rights to said products. Under Apple’s Partner Program, approved affiliates are allowed to: * Sell Content * Partner as a Company * Partner as a Content Provider * Join the Affiliate Program * Linking Tools * iTunes LP and iTunes Extras * App Store Volume Purchase (20 apps or more)
Content is accessed by registered account or by using prepaid gift cards available at numerous retail locations throughout the world, via any personal computer, iPhone, iPad, iTouch, iBook device through Wi-Fi or direct internet connection via wire.

Comparisons
The following chart best displays the comparison offerings of iTunes. Operations | | Content | | Functionality | iTunes Player | | iTunes Store | | Devices | iTunes Window | | Searching | | iTunes at Home | Browse | | Sharing | | iTunes Syncing | Playlists | | Purchasing | | iTunes on the Go | Genius | | Features for Parents | | Managing | | Discovering Music | | | Importing | | Purchasing Music | | | | | Purchasing Movies | | | Burning | | Renting Movies | | | Sharing | | | | | Music Playback | | Purchasing TV Shows | | Radio | | Podcasts | | | Video Playback | | App Store | | | Accessibility | | iTunes U | | | | | iTunes Gifts | | | | | More in the Store | | | | | iTunes Ping | | |

Competition
While traditional media providers such as movie rental, and record stores are still competitors as long as they exist, they no longer have the same influence on Apple’s marketing and sales strategy that they once possessed. Current major competitors are broadcast TV, pay-per-view, satellite, and cable, Netflix, Redbox and Hulu. Of all the majors, Hulu is the one competitor that Apple is approaching with eye towards acquisition. In an article from New Media’s Siliconrepublic.com dated July 22, 2011, places sources close to both Hulu and Apple, suggesting that Hulu’s TV content is the main driver behind the potential acquisition and that because of Hulu’s compatible content access model, in that it avoids first-run cinema, Hulu is not encumbered by large inventory costs or high licensing fees from the networks or studios, also the fact that Hulu has access to 815 million viewers would effectively give iTunes a near monopoly on streaming content. After posting quarterly revenues of US$28.5bn and profits of US$7.3bn, Apple is believed to be the worlds second-most valuable company.
Sources:
About Hulu
(http://www.hulu.com/about)
(http://www.hulu.com/about/media_faq#competitors) Apple, iTunes http://www.apple.com/itunes/ http://www.apple.com/itunes/what-is/ http://www.apple.com/itunes/how-to/ http://www.apple.com/itunes/features/ Blanchard, David, The Top 25 Supply Chains of 2008 - Industry Week Forums
(http://forums.industryweek.com/showthread.php?t=1684)

Hulu the Content Aggregator | Floating Data
(http://blogs.cornell.edu/newmedia11ko244/2011/02/16/hulu)

Hulu Plus Not an Immediate Threat to Netflix – Trefis
(http://www.trefis.com/stock/nflx/articles/18558/hulu-plus-not-a-threat-to-netflix)
New Media, Apple is Planning to Buy online TV Player Hulu
(http://www.siliconrepublic.com/new-media/item/22791-apple-is-planning-to-buy-online-tv-player-hulu)

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