TV Advertisers Loving Hulu, says New Survey

As new CEO Mike Hopkins takes over the reins at Hulu, he inherits a healthy enterprise that is being positively embraced by Madison Avenue, even as its future industry role and value are questioned. Hopkins is facing intensifying competitive challenges as Netflix, Amazon, Intel, LG, Samsung, DirecTV, Apple, Google, cable operators, Aereo, Roku, Walmart and emerging video players' ramp up both their original content investments and streaming/live and library resources. On the advertising front, Hopkins confronts an industry in which inventory supply will outpace demand by a two to one ratio, with marketers pushing a more-than-willing agency community to accelerate programmatic and automated media buying.

But the good news for Hopkins is that most if not all of Hulu's commercial inventory is among the most highly valued in the industry. Nearly three-quarters of 300 advertiser and agency executives surveyed in the recent MyersBizNet Survey of Advertising Executives on Digital Media Value and Performance rate Hulu's overall market value and performance as very good/excellent (4/5 on a 5 point scale). A significantly higher percentage of traditional media agency and advertiser executives rate Hulu positively, compared to digital media agency executives. Still, 64% of the latter group expresses positive attitudes toward the network TV online offshoot.

Almost 80% of traditional agency and advertiser executives consider Hulu to offer high value for the investment, compared to only 60% of digital agency executives. Hulu's value among traditional TV advertisers and media buyers is typically being measured directly in cost-comparison to primetime network television while digital agency buyers and planners are drawing comparisons to more digitally-centric costs delivered by companies such as AOL and Yahoo. Online video CPMs have been inflated above primetime costs but have come down in the past two years as networks package their online inventory with primetime buys, often using online ad impressions as make-goods for primetime audience deficiencies.

Seventy-one percent of ad community respondents rate Hulu positively for "Innovation and Market Leadership," a percentage topped only by Forbes.com, TVGuide.com, Thomson Reuters, CNET, ABC Interactive and Telemundo Interactive (among legacy media companies). Twenty-nine legacy media company digital groups were evaluated in the Myers survey. Forty-two "digital native" companies were also evaluated independently. Overall, based on the aggregated average of performance measures, Hulu ranked seventh among legacy media companies' digital groups. Ahead of Hulu in the study are Forbes.com, Hearst Magazines Interactive, Wall St. Journal, CNET, The Weather Company and Meredith Media Sales. Seventy-five percent of total survey respondents and 82% of traditional agency and advertiser executives rate Hulu's content 4/5 on the five point scale.

The majority of the estimated $5.5 billion being invested this year in digital video content (including You Tube) goes to the broadcast networks and, to a lesser extent, cable networks. This season, according to CBS' Dave Poltrack, the network (which has a limited agreement with Hulu) has experienced strong 43% growth in streamed views of its primetime programming. ABC-TV and CBS-TV have been especially aggressive in streaming full episodes over their own full episode players. MyersBizNet forecasts total ad spending on digital video will increase 40%-45% in 2014, 35%-40% in 2015 and will be more than $30 billion by 2020.

Hulu shares ad revenues it generates with the networks and an increasing percentage of total Hulu revenues are derived from premium subscriptions. Hulu's partners have successfully lobbied to increase Hulu's commercial inventory, where viewers have less ability to skip or fast forward through commercials. Networks have also lobbied to directly sell some inventory in their programming that is viewed on Hulu, empowering advertisers to sponsor specific series across all platforms. While sponsorship association with TV series is rare during broadcast network primetime (except sports), sponsorships are becoming more common in cable. Advertisers seeking strong association with specific content and audiences may return to the 50s model. Social TV, as addressable advertising and direct consumer connections make this model more economically viable. As cable TV operators incorporate dynamic ad insertion into video-on-demand offerings and improve the TV Everywhere user interface (and its economics), VOD will become a more desirable vehicle for advertisers, especially since the ad skipping feature is disabled.

Hulu is a partnership of Disney/ABC-TV, Fox and NBCU, although the Comcast/NBCU merger agreement requires that the company have no vote in Hulu operating decisions. The partners sought a buyer for the company, but were unable to reach agreement with suitors primarily because the price offered was insufficient and they were unwilling to enter into long-term programming commitments.

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