All Things Digital

As the lines between television and the Internet grow increasingly blurry, online video services are seeing quite a bit of audience growth. Predictably, YouTube has been top among them. The company served up five billion video streams to some 77 million unique users in July, according to Nielsen Online, which ranked it as the top Web brand for that period. Fox Interactive Media (NWS) ranked second with nearly 300 million streams and just over 20 million uniques. Not much of a surprise there, either. What is surprising, though, is Hulu’s July performance. The company saw a 20 million video stream spike for the month, thanks in part to the direct-to-Web musical, “Dr. Horrible’s Sing-Along Blog,” which brought quite a few viewers its way. And, with more than 105 million streams and 3.2 million uniques, Hulu placed eighth in Nielsen’s July ranking, surpassing CNN and Turner Sports and Entertainment Digital Network. Not bad for a service that only launched in March.

Hulu claims its mission is “to help you find and enjoy the world’s premier content when, where and how you want it.” And now, three months after it first launched, it’s finally getting around to delivering on that promise.

This morning the video site, which is jointly owned by NBC Universal (GE) and News Corp. (NWS) (which also owns Dow Jones and this site), said it will offer full episodes of “The Daily Show with Jon Stewart” and the “Colbert Report” beginning today. The deal, which brings the popular late-night satirists to the site just in time for the presidential election, is something of a surprise, since Comedy Central parent company Viacom (VIA) has so far refused to sign on to Hulu.

But that may change if this first tentative experiment bears fruit. “I think with success breeds success. It could open some other doors,” said Erik Flannigan, executive vice president of digital media at MTV Networks, the Viacom division that runs Comedy Central. “Hulu in many ways may put the shows in front of some people who might be more casual viewers but who might be interested in what’s going on with the elections.”

If YouTube aims to someday host every music video ever made, as co-founder Steve Chen once claimed, it better get crackin’. Because the market’s getting crowded.

This morning PluggedIn Media launched a new service for streaming HD-quality music videos. Backed by Overbrook Entertainment–Will “Gettin’ Jiggy Wit It” Smith’s production and management company–PluggedIn will offer some 10,000 videos from EMI (EMI.L), Vivendi (VIV.PA) and Sony BMG (SNE), along with the standard music-site fare–artist bios, users playlists and whatnot. That being the case, how does PluggedIn hope to differentiate itself from the competition? “We look at all the changes shaping online entertainment and see massive opportunity for lots of companies to appreciate and forge really viable consumer connections,” said CEO Jeff Somers. “We think what will separate us from what is out there today is an unbelievable high-quality viewing experience, matched with in-depth content and community tools.”

Perhaps. But it will also create dangerous rivalries with some powerful competitors. With its social-networking features, PluggedIn will soon find itself in direct competition with MySpace Music (NWS) as well as Hulu (GE).

Apparently, NBC Universal doesn’t know that jumping into rebound relationships after a particularly painful breakup is rarely a good idea. After Apple tossed its fall TV lineup off iTunes in August, saying the two companies couldn’t agree on pricing, the broadcast network has been spitefully seeking out distribution deals wherever it can find them: Hulu. Then Amazon Unbox. The hilariously ill-conceived NBC Direct. And Netflix.

Now SanDisk. Today, NBC U said it would make its shows available on SanDisk’s recently launched Fanfare PC-to-TV video player service. Come January, consumers will be able to download episodes of NBC series they can no longer purchase on iTunes, and transfer them to their TVs via SanDisk’s TakeTV product.

“Fanfare is going to be an iTunes-like store for us,” NBC U’s president of digital distribution, Jean-Briac Perrette, told Silicon Alley Insider. But with one noteworthy difference: NBC U controls pricing. “The business model is one we like,” said Perrette. “It’s normal for content owners to control the wholesale price of their content. This is no different than any other wholesale relationship; it’s not different in the sense that Wal-Mart decides to price DVDs at a loss. Ultimately we still set the wholesale price.”

Why Hulu? Objectively, Hulu is short, easy to spell, easy to pronounce and rhymes with itself. Subjectively, Hulu strikes us as an inherently fun name, one that captures the spirit of the service we’re building.”

–Jason Kilar, CEO, Hulu

Hulu.com, the News Corp./NBC Universal video service that sounds like it was named by the Web 2.0 Bull—t Generator™, went into private beta today, and while critics continued to snicker at the name, most admitted the ad-supported service was, by and large, pretty decent. ”I am impressed thus far,” wrote BoomTown’s Kara Swisher. “I will, of course, reserve judgment until I get to test-drive it for a while, but in concept and tone and aims–that is, more open than I ever expected the service to be–it is off to a good start.”

Over at GigaOm, Om Malik, who ridiculed the service this past summer, reversed course and called it brilliant. “From the moment I learned about the new company, I was skeptical,” he wrote. “And now, after spending three hours or so on the service, I am ready to eat crow. And not just any crow, but rotten, six-month-old crow: I have never been more wrong. … Hulu doesn’t seem like a YouTube (GOOG) competitor. (This is yet another thing I was wrong about.) What it really is trying to do is time shift–and place shift–television on a massive scale. It’s basically an attempt to counterbalance the tight control that cable and satellite networks have over distribution. [Hulu] is the kind of service that should scare start-ups trying to develop their own distribution platforms, such as Joost. It is also the kind of service, if it can attract enough viewers, that could succeed in relegating YouTube and others like YouTube to the ‘user-generated content’ world, at least in the U.S. market.”

Rupert Murdoch is in an unusually generous mood these days, isn’t he? This morning Fox Broadcasting said it would make season-premiere episodes of seven of its TV shows available for free through Apple’s iTunes store. Beginning this week and continuing through the two that follow, the network will offer free downloads of such series as “Prison Break,” “Bones,” “American Dad” and “K-Ville.” Said Fox’s William Bradford, senior vice president of content strategy, “We wanted to give our viewers and consumers a new way to discover our content.”

… And get hooked on it, and then watch it throughout the fall season–either on ad-supported network TV or as a paid download from the iTunes store. Which doesn’t sound like such a bad strategy when you think about it. Certainly, it’s far more appealing than NBC Universal’s hilariously ill-conceived download service and an interesting alternative to ABC’s, which will put full-length prime-time shows on AOL one day after they air on broadcast television.

That said, all three networks’ strategies are problematic in that they require the audience to access programming in disparate ways. Even traditional broadcast TV, as antiquated as it is, doesn’t force viewers to watch different networks on different systems. “The consumer is probably becoming confused,” notes 24/7 Wall St.’s Douglas A. McIntyre. “He will need to go to AOL to watch ABC. CBS programming is on the iPod. NBC will be doing direct downloads from its own Web site. NBC and News Corp. are starting a joint online venture called Hulu. TV and film will also be available on the Amazon Unbox. Wal-Mart has started a video download service. The large retailer will charge for its content. NetFlix is also planning an online movie service. Viewers will be better off getting their TV and movies from illegal file-sharing sites. At least all of the content is available from one source.”

NBC Universal apparently has high expectations for Hulu, its forthcoming joint online video venture with News Corp. So high, in fact, that the company feels comfortable pulling its TV shows off iTunes. According to a report in today’s New York Times, NBC Universal has decided not to renew its contract to sell digital versions of its television shows on Apple’s digital media store. Seems the company–which is the No. 1 supplier of digital video to iTunes–would like more control over the pricing and packaging of its content.

But so would most other content vendors who’ve signed iTunes contracts. And though many have tried, none has been able to convince Apple CEO Steve Jobs to recalibrate the underlying business dynamics of the digital-media market he created. Still, as the New York Times notes, talks between the two companies continue, which may mean NBC is just playing hardball.

If that’s the case, it best be in top form. The mercurial Apple CEO has been notoriously intransigent in matters like these. As Gartner analyst Mike McGuire said of the content companies last year, “I think if they’re throwing down for a street fight, they may have picked somebody who’s as good or better at it than they are.”

I’ll say. This just in from Apple:

iTunes Store to Stop Selling NBC Television Shows

CUPERTINO, Calif.–Aug. 31, 2007–Apple® today announced that it will not be selling NBC television shows for the upcoming television season on its online iTunes® Store (www.itunes.com). The move follows NBC’s decision to not renew its agreement with iTunes after Apple declined to pay more than double the wholesale price for each NBC TV episode, which would have resulted in the retail price to consumers increasing to $4.99 per episode from the current $1.99. ABC, CBS, FOX and The CW, along with more than 50 cable networks, are signed up to sell TV shows from their upcoming season on iTunes at $1.99 per episode.

… Apple’s agreement with NBC ends in December. Since NBC would withdraw their shows in the middle of the television season, Apple has decided to not offer NBC TV shows for the upcoming television season beginning in September. NBC supplied iTunes with three of its 10 best-selling TV shows last season, accounting for 30% of iTunes TV show sales.”

Ouch. Silly media conglomerate, bringing a knife to a gunfight …