• Netflix's Expanded NBCU Deal Further Marginalizes Hulu Plus

    This morning Netflix announced its latest content licensing deal to bulk up the its streaming catalog, adding a range of programs from NBCU. It's a long list which includes next day access to Saturday Night Live (plus the full back catalog), last season episodes for 30 Rock, The Office and Law&Order: SVU (in addition to renewing back episodes already available), plus past seasons of Friday Night Lights, Psych, Monk, Battlestar Galactica, Destination Truth and Eureka. Netflix didn't identify exactly how many total episodes the deal adds to streaming, but it's very substantial.

    On the losing end of this deal is Hulu, and more specifically, its budding subscription service Hulu Plus (note the irony that one of Hulu's parent companies is NBCU). As I explained in late August, in "88% of Hulu Plus Content is Already Available for Free on Hulu.com," when it comes to content, Hulu Plus is getting squeezed from all sides, seriously limiting its ability to be much more than an outlet for delayed-release current season and past seasons' episodes of broadcast programs. This is an extremely narrow value proposition which is unlikely to gain widespread adoption.

    Hulu Plus's biggest headache is Netflix, which is adding streaming content at a ferocious pace. Hulu can't compete with Netflix's deep pockets and massive subscriber base (its rumored $1 billion deal for Epix content is the most striking example of Netflix's financial prowess, not to mention its current $8.5 billion market valuation). In contrast, Hulu Plus has minimal subscribers and as a private, still relatively early-stage company, has finite resources.

    Hulu Plus's other headache is that it can't gain solid access to cable programming because cable networks don't want to antagonize their big pay-TV distribution partners, who by the way, are also in the midst of launching their own TV Everywhere services. And with Comcast acquiring NBCU, the waters get even muddier for Hulu Plus, as Comcast will be reluctant to endorse an over-the-top competitor.

    In short, Hulu is bringing a knife to a gun fight as it tries to add content to Hulu Plus. To be sure, it's not Hulu's fault that it's competing in the land of giants, but it is its fault for not having launched its subscription service earlier when there was much more running room. It's also Hulu's fault that it decided to include in-stream advertising in Hulu Plus, which seriously undermines it premium positioning and makes it inferior to commercial-free viewing on Netflix streaming.

    With so much going against Hulu Plus, I'm very hard-pressed to see how it can succeed. If I'm missing something, someone please post a comment and set me straight. I don't think I am.