Cringely on Business Week calling Hulu the future (and iTunes tv killer)

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I, Cringely » Blog Archive » The Future of Internet TV (in America) - Cringely on technology:

Now here’s the key for all the pundits who see Apple failing or faltering: you are looking in the wrong direction. It doesn’t matter how many networks are part of Hulu. In time they will probably all be there. But Hulu will remain an artifact of network labor agreements and will be vulnerable for that reason. Hulu can’t afford to PAY its way.

Follow the money.

Apple has at this moment just under $29 billion in cash and not many good ways to get a reasonable return on that money. Only Microsoft has more cash than Apple and Microsoft is being pulled in a lot more directions so Microsoft doesn’t have Apple’s flexibility.

What will Apple do with that money?

Most of it will remain unspent is my prediction, but I’m guessing we’ll shortly see $3 billion or so per year go into buying Internet rights for TV shows — not old TV shows but NEW TV shows, shows of all types.

TV production in the U.S. is approximately a $15 billion industry. An extra $3 billion thrown into that business would change its dynamics completely. Most production isn’t done by networks but by independent producers who are hungry for revenue and risk reduction. Three billion Apple dollars spread around that crowd every year would buy Internet rights for EVERY show — more than every show in fact. Whole new classes of shows would be invented, sapping talent from other parts of the industry. It would be invigorating and destabilizing at the same time. And because it is Apple — a company with real style — the new shows wouldn’t at all be crap programming. They’d be new and innovative.

And just as the artistic heart of TV shifted to cable with HBO in the 1980s, so it will shift to the Internet and Apple.

And where will be Hulu?

Nobody will care.

Actually, where iTunes can clean up is to get in the way of cable syndication and get stuff from other countries FIRST. Like, say, Dr. Who or Torchwood. If they can offer up enough money that the iTunes download (or eventual stream) comes out the day the UK is broadcast (just time-shifted to our time zone), they could get a huge chunk of the hardcore fans to pay up for it, fans who really hate waiting for some American network to decide "ok, there's enough episodes, I'll start running them" (which is the current reason why the last 2 Dr. Who's have not been seen in America yet).

Their other ace in the hole: foreign TV that cable doesn't give a crap about, TV that acknowledges that there are quality programs made in other countries in that country's *language*. If Apple opens up a market for foriegn language TV (and adapts iTunes search so you can find them), that's another huge audience of perhaps home-sick geeks from other countries that would be willing to pay to see some of the stuff their families back home have been writing about. Apple also has the ability to get into this country that which it seems the FCC would rather not: news not filtered by "edited for America" censors (a-la, BBC World News on BBC-America).

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I left more details in comments at the site:

For the English-speaking, they could also use it to buy the rights to more British (and Canadian) programming that the cable channels either ignore, or won’t run for months and months later (e.g., Dr. Who). Many a supportive Dr. Who fan would much rather see it with their British friends on-line than wait 5 months (or more than a year as will be the case with the 2009 productions) when some cable company finally carves out a spot on their schedule. Plus there’s many more brit-coms and dramas that get produced that may never get to this side, or only get one run at some unknown time on some random channel (like a PBS station in some rural part of the world) with no promotion, so nobody saw them. Dr. Who fans in America would *love* to see other shows that David Tennant or upcoming Matt Smith have done (including one where he’s with former companion Billy Piper), but that hardcore audience is so scattered and thin it makes no sense for a cable company to carry these shows.

In short: once again, I see you (as well as Business Week) arguing for giving Americans more ways to see the same shite that the media wizards seem to think Americans want to see (and given American Idols ratings, I can somewhat understand why). But the real market potential of online is giving people what they can’t get elsewhere because it is too expensive to distribute on mass. More than half of “TV Series X season 1″ is lost to dvd production and distribution, which also requires producing more copies than you might need in order to get every store to carry it. THAT model is just insane, guaranteeing that these things end up in the $3 bin in half the country, for product that never really sells well at full price no matter where you are.

Now take something where even that horrible distribution model is unprofitable (mostly because your target audience is concentrated in city suburbs, or scattered too thinly for store distribution to make sense) and, well, it’s a no-brainer to say “never ever show this to anybody”.

Online distribution is the key to getting this material to reach the audience that’s been begging for it on every online forum on media I know about.

Now, if only the media companies can realize that just as with HiDef, there’s still an audience that would rather pay a touch more for lossless music downloads than highly compressed mp3/a4m tin box crap…