Hulu CEO Steps Down Without Answering the Question: Subscriptions or Ads?

hulu popular“I’ve decided to depart Hulu in Q1.”

Doesn’t get clearer than that. Jason Kilar, the driving force behind the online streaming service is leaving for parts unknown with hardly a rumor about why or where he’s going.

Kilar came to Hulu from Amazon and was instrumental in turning the company into a serious contender in the streaming game.

Kilar says in his departure post / email:

We have grown from a few hundred thousand in revenue in 2007 to generating almost $700 million in revenue in 2012 alone. We have created a video subscription service that is growing unusually fast, adding over 200K new subscribers in the past 7 days alone (a new record). We have proudly generated over $1 Billion for our content partners since we excitedly entered private beta in October 2007. Our video advertising service delivers world-class results and sets the pace for the industry. We have authored scores of inventions along the way.

There’s no doubt that Kilar did great things for Hulu but how about this? Back in October, Kilar received a $40 million payout for his share of the company. It was rumored that he was going to leave right after that but he stuck in out for three more months. Why? Because on December 31, 2012, he was due to receive a $6 million dollar year-end bonus.

Let me rephrase that. By resigning on January 4 instead of on December 31, he pocketed $6 million dollars. Contract or not, earning it or not, that just feels wrong.

Now let’s talk about Hulu’s bigger problem. The company cannot decide on whether to be an ad supported service or a subscription service. Right now, they’re both and that’s bad. You can watch plenty of free TV online but you have to suffer through ads inconveniently placed throughout the show. Or you can pay for the premium service Hulu Plus, which allows you to watch anything from the library on your mobile device, but you still have to suffer through the ads.

I did it for months because I liked their selection of classic TV shows but those ads made me crazy. It’s not that I’m against advertising but Hulu rotates through the same two or three commercials per show and they appear at odd intervals instead of the natural commercial breaks that are built into a show. After three months, I gave up and went back to Netflix.

Some people believe that Hulu needs to invest in original programming if they want to survive. I don’t agree. I say, all they have to do is leave the ads on the free service and remove them from the pay service, even if they have to charge a little more. It works for Netflix. It works for Amazon. It should work for Hulu, too.

Now that more people are open to new ways to watch TV, Hulu has a chance to become a major force in the streaming market. Can they do it without Kilar? That’s the $46 million dollar question.

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Hulu CEO Steps Down Without Answering the Question: Subscriptions or Ads?

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