Hulu's Infighting: Why the CEO Threatened to Quit

Jason Killar - Consumer Electronics Show - 2011
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To compete with Netflix and others, Jason Kilar has been waging a war over subscription rates and content with owners Walt Disney, News Corp. and NBC Universal.

NEW YORK - Online video joint venture Hulu is discussing a major  transformation amid continued disagreements among and with its owners Walt Disney, News Corp. and NBC Universal, the Wall Street Journal reported Thursday.

Management has mulled refocusing Hulu as an online version of a cable operator that would offer live TV channels and video-on-demand content to subscribers, the paper said, citing people familiar with the situation. That kind of service would offer channel bundles like the ones sold by pay TV operators, such as cable and satellite TV firms, it said.

The discussions come as its owners continue to be at odds over Hulu's business model and sell content to such rivals as Netflix and Apple amid concerns that Hulu’s free offers are eating into their traditional business. Particularly Disney and News Corp. have considered pulling more free content from the site, according to the paper.

"When we blaze trails, which is what Hulu is about, it takes time," Hulu CEO Jason Kilar told the Journal in explaining the at times stormy relationships. "That is not for the faint of heart, and we understand that."

The Journal said that Kilar threatened to quit this fall as he pushed for the price for the new Hulu Plus subscription service to be dropped from $9.99 to $4.99 per month to allow the company to better compete with Netflix. His owners compromised and agreed on a $7.99 price.

The Journal pointed out that Chase Carey’s return to News Corp. as president, COO and deputy chairman has been one of the external changes that has caused Hulu to look for new ways as Carey has pushed to create new revenue streams and therefore had a different vision for Hulu that was more subscription-focused.

It also recounted a few high-profile conflicts of the past year.
In April, for example, when Disney unveiled an app for Apple's iPad that would offer free access to some ABC shows with ad support, Kilar called Disney CEO Bob Iger to express his concern as Hulu was ready to offer the paid Hulu Plus service on the iPad, the Journal reported.

When NBC Universal recently gave new episodes of Saturday Night Live to Netflix, Kilar similarly complained in a phone call with to outgoing NBC Uni CEO Jeff Zucker.

According to the Journal, Hulu in part tabled its exploration of a possible IPO with a valuation of around $2 billion, because Hulu would need to lock up long-term access to its owners' programming to succeed with the plan. Its current licensing deals expire this summer. The owners didn't want to negotiate while Hulu was under pressure to cater to Wall Street, leaving it to look for alternative ways to raise capital, including further investments from the owners themselves, according to the Journal.