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A version of this story first appeared in the Oct. 23 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
When longtime Fox distribution executive Mike Hopkins took over as Hulu CEO in 2013, the first question employees asked was: “When are you building yourself an office?” Hopkins was the suit hired at the startup-like Hulu to replace firebrand founding CEO Jason Kilar, who departed after clashing with corporate owners 21st Century Fox, Disney and NBCUniversal. But Hopkins, 46, has avoided the executive suite and adopted a standing desk amid his 940 employees (though he does have a small conference room for private meetings).
A UCLA business school grad who spent two years on the Hulu board before joining full time, Hopkins is charting the next chapter for the streamer, which has trailed Netflix and Amazon Prime both in subscribers and prestige. Still, Hulu earned $1 billion in revenue in 2013 and has grown its sub base to nearly 9 million in the U.S. Now, Hulu finally is addressing complaints about ads with a pricier commercial-free tier ($11.99, compared to $7.99), though there are no plans to completely abandon advertising.
Meanwhile, Hopkins has given content chief Craig Erwich a mandate to spend competitively on programming. In the past year, Hulu has inked rich deals for exclusive streaming rights to Seinfeld and South Park, plus Empire and expansive pacts with Viacom and Epix. Hulu also has rolled out originals, including The Mindy Project (Sept. 15), revived after its Fox cancellation, and Casual from Jason Reitman (Oct. 7). On deck is ambitious hourlong fare from J.J. Abrams (11/22/63, starring James Franco) and Jason Katims (The Way, with Aaron Paul). The San Diego native, who lives in Santa Monica with his wife and 11-year-old daughter, invited THR to Hulu’s headquarters at Santa Monica’s Colorado Center to discuss the changes he’s made and why he shelled out $700,000 an episode for nine seasons of Seinfeld.
“You don’t see Bart [Simpson] that way very often,” says Hopkins, who prefers running and golfing over skateboarding.
In 2012, Hulu said it invested $500 million in content. How much is that number today?
Quite a bit higher. When you look at what we pay for our current-season content, the acquisitions we’ve been making — from Seinfeld to South Park to Empire to the output deals with FX, AMC and Turner — we’re spending quite a bit. And we’ve really stepped up our originals. We’re probably spending 10 times in our budget for next year what we were spending three years ago on originals.
Some said the $700,000 per episode you reportedly paid for Seinfeld was too much given that reruns are still on linear TV. Are they wrong?
I don’t think the numbers are reported accurately. Well, I know they’re not. Despite that, it’s performed better than we ever expected. Subscribers have flocked to that show in ways that we haven’t seen with any other show.
When Netflix’s deal with Epix ended, you swooped in. Why were movies not a priority up until that point?
It’s just a matter of what’s available. When I look at the landscape, all the big studios’ output has been committed for a long time to different outlets. So when we started this process, there just wasn’t really anything to go after, unless it was a later library, which we have. We’ve got the Criterion Collection, and now we’re adding Paramount, Lionsgate and MGM through Epix.
Will Hulu jump into original movies the way Netflix and Amazon have?
Movies are important for us, but I’m not sure we’re at a point where we’re going to be doing original movies.
The perception has been that Hulu doesn’t have the budget of its competitors, so what kind of budgets do you have for your originals?
That may have been the case a couple years ago, but since we hired Craig Erwich and [head of originals] Beatrice Springborn, we’ve taken our investments in original programming and the associated budgets to a whole new level — budgets that are on par with any streaming business or network. We couldn’t be in business with creators like J.J. Abrams, Jason Reitman, Jason Katims, Mindy Kaling and Amy Poehler unless that were the case. We recognize the value in original programming and know that consumers crave bigger, better stories from world-class storytellers.
Are you focused more on making your own shows or buying originals from studios?
Our main goal is finding projects that we believe will resonate with viewers and stand out. So, we’ve had projects come in from studios and we’ve also developed some ourselves. We’re flexible, and I think at this point in our growth curve that’s the best way for us to attract the kinds of talent we really want to work with.
What’s the biggest surprise hit on Hulu?
The Mindy Project. We put seasons one and two up in spring 2014, and since that moment, it’s become a top five show for us. So when it looked like Fox was not going to pick it up, we approached Mindy, and we’re really happy to bring her show on because it was performing disproportionately well on Hulu than it was in the Nielsen ratings.
Hopkins was part of the Fox team that helped bring in Hulu co-owner Disney in 2009.
The Mindy Project premiered in September. Will you release ratings?
With our advertisers, we sell campaigns. So we do report back to them on how many impressions they got in which demo and which category. But we haven’t publicly said, “Here’s our top show, or here’s how many streams we’ve received.” The tendency would be for people to compare stream numbers or whatever metric we provide to Nielsen ratings, and we think it’s totally apples and oranges. So we haven’t done that.
Some have speculated that you priced your ad-free tier high to deter consumers from signing up. True?
We wanted to have two products, two different price points that we thought were really good values to consumers. We have the $7.99 price point with the limited commercial playing, so the commercial-free plan had to be more, right? We tried to pick a price, based on a lot of research and a lot of analytics, that would maximize the value for all customers. We’re happy regardless of which plan a customer chooses.
What do you envision being the breakdown of people who pay for some ads or no ads?
The mix of subscribers taking our no-commercials plan and limited-commercials plan is exactly what we projected. We assumed that a large majority of people would choose to stick to the limited commercials plan — and that’s held true for new sign-ups as well.
Will you ever do away with ads?
Advertising is a big advantage for Hulu. These revenues are important for our business so we can continue to create and buy content our users want, and so it’s hard to see how we’d ever do away with it. That said, giving subscribers choice in the matter is the right thing to do, and that decision has proven successful so far.
Mementos from Hopkins’ 16 years at Fox (including the network’s NFL robot) are scattered near his desk. “Before I came [to Hulu], I’d say that I managed by walking around, but I sat in my office and everyone came to me,” says Hopkins, photographed Sept. 14 at the Hulu offices in Santa Monica. “Here, I’m always walking to someone’s desk.”
Are you doing anything about complaints that Hulu airs the same ads over and over?
We actually do have caps on frequency. We’re working hard to make sure that those are enforced and that no more than two of the same creative [ads] show up in any episode. But people can watch three or four episodes of the same show, and then they’ll get multiple creatives in that instance. We’re working to try to make sure that our overall ad experience, including repetition, is better and better.
Netflix is growing overseas. Is international expansion a focus for Hulu?
We’ll see. It’s not something that we’re focused on at the moment, but I wouldn’t be surprised if we don’t look around the globe in the next year or two and see where else we should be.
What needed to change at Hulu when you took over?
Well, we weren’t investing in content, so we’ve done that. We had just received additional funding from our ownership right when I started, so we were able to take some of that funding and really deploy it. The overall strategy of the company wasn’t really set, either, so we spent a lot of time on that: building out the plan for what kinds of content we would buy, what our marketing strategy would be. And for about a year now we’ve been executing against it.
Kilar was vocal about the frustrations that Hulu’s corporate structure created. Have you experienced those same problems?
It’s night and day. I don’t think we have any issues there today. We couldn’t be doing what we’re doing if it wasn’t for the support of Fox, NBC and ABC.
After Hopkins closed the ‘Seinfeld’ SVOD deal, Sony gifted him a limited-edition photo of the cast during the last day on set.
Before you came to Hulu, there was talk of an IPO or sale, but the owners reinvested. That money has to run out at some point, so will an exit be on the table again?
At this point, we’re really just focused on building the business. So I don’t think any of those outcomes are really something that Fox or Disney or NBC are going to think about until we’ve built it. That’s what we’re focused on.
The companies that Hulu licenses content from are now launching their own streaming services. How does that impact you?
I’m not sure we know how it’s affected Hulu yet. It’s all so fresh in the last several months. But it’s probably positive because what you’re seeing is people learning that they can get access to content on the very same devices that we’re available on. If you fire up your Apple TV, we’re right there along with a lot of other folks. In many ways, we’re out ahead of a lot of people with respect to our distribution footprint.
Hulu hallways are named after TV streets, including ones from ‘Family Guy’ and ‘Sesame Street’ near Hopkins’ desk.
How would the possibility of Apple entering the original content game change the relationship you have with the company?
Well, I’m not sure, but I don’t foresee there being any conflicts. If you look at Amazon Fire TV, we’re prominently distributed there as well, and Amazon Prime Instant Video is a competitor of ours. [Apple’s] primary business is selling hardware, so my assumption is they’ll always be supportive of us and we’ll be working closely with them.
What’s your favorite Seinfeld episode?
It’s probably the famous one with the puffy shirt. When I would communicate with people at the different companies that we were negotiating with for Seinfeld, that was always the subject of my email: Puffy Shirt. It was like a code name.
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