• Comparing iTunes and Hulu Monthly TV-Related Revenues - For Now, It's No Contest

    Last week Apple announced that it has sold 200 million TV episodes to date and also that all four of the major broadcast networks are now providing HD versions of their prime-time shows. These periodic updates are always welcome as Apple is notoriously parsimonious with its iTunes numbers, making it hard for analysts to get a real handle on how the store is doing.

    This latest total got me to thinking about the relative sizes of online aggregators of prime-time TV shows. Below I've made some calculations comparing the revenues of iTunes, the largest paid download store, with the revenues of Hulu, likely the largest free, ad-supported streaming site for TV programs. The conclusion is clear: for now at least, iTunes is a far larger business, demonstrating that despite the obvious appeal of free video, a segment of consumers are still plenty willing to buy and collect individual episodes.

    iTunes calculations

    I estimate iTunes is currently generating about 10 million TV program downloads/month. TV program downloads officially began just about 3 years ago with ABC's initial iTunes partnership. There's obviously been a ramp over the years, so if you assume 50% of the volume came in the first 3 years combined, and 50% in the 10 months of '08 alone, that produces 100 million TV program downloads year to date or about 10 million downloads/month. (that actually synchs with the fact that Apple last disclosed 150 million total TV program downloads in May, '08, 5 months ago).

    To grossly simplify, let's say the download price is $2/episode. I know that doesn't take account of the $3 HD downloads iTunes launched last month (of which it says it sold a million) or the varying prices of international downloads. At $2/episode iTunes does $20 million/month in gross download revenues from TV programs.

    Hulu calculations

    comScore said Hulu delivered about 119 million video streams in July '08. Since there's a ton of content at Hulu, estimating how many of those streams were full-length TV programs is anyone's best guess. But let's say it's 10%, and that ALL of these streams were watched in their entirety, which is obviously optimistic. That would yield just under 12 million full episodes watched/month. That feels high to me, but let's stay with it for now.

    Recently, in "Broadcast Networks' Use of Broadband is Accelerating Demise of Their Business Model," I estimated that given Hulu's extremely light ad load and an assumed $60 CPM for its ads, it may be generating $.18 of revenue/viewer/episode. Feedback I've received suggests that probably an overstatement, so let's bump it down just a bit to $.15. With 12 million episodes/mo, that would translate to about $1.8 million/month in gross advertising revenues from TV programs alone.


    Though the above numbers need to be taken with a grain of salt, they suggest there's a huge gap in TV program-related revenues between iTunes and Hulu. Now of course iTunes has been around a lot longer than Hulu, and of course it benefits from the massive popularity of the iPod, and more recently the iPhone. We also can't forget there are lots of places to watch free TV episodes online while there are comparably fewer online stores to purchase and download high-quality episodes. So it might actually be fairer to compare the monthly revenues of ALL the online aggregators (and the networks' own sites too) to iTunes to get a clearer comparison.

    Still, I think comparing iTunes and Hulu does show how nascent the streaming TV market is today. In the long-run, I'm a believer that free, ad-supported trumps a la carte paid downloading. But for now, when it comes to real revenues - which for many is the only metric that really matters - it's no contest.

    What do you think? Post a comment now!