Hulu Hoopla?

Jason Kilar is underscoring some of the differences between his new online video startup, Hulu, and its corporate parents: NBC Universal and News Corp., owner of the Fox Broadcasting Company. He refers with a laugh to the makeshift platform for his computer monitor--a cardboard box from a 24-count Variety Pack of Kellogg's "Fruity Snacks," secured by a member of his staff during a recent Costco run.

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"The culture of Hulu is very different than Fox and NBC," says Kilar, the venture's CEO, who came over from Amazon.com in 2007 after nearly a decade working for Jeff Bezos. "It would remind you a lot more of a Silicon Valley startup than a media organization. This company should be a technical company, and that's really what we are. I don't think you would be impressed with the furniture we have."

Hulu represents the most aggressive effort to date by old guard media to tip the competitive balance in the fast-growing online video space from powerhouse upstart YouTube, which currently controls more than two-thirds of all Web video traffic, according to the Hitwise monitoring service. YouTube features rough-hewn, user-generated content but has crafted partnerships with premium content providers such as CBS, BBC and Sony Music Group. Other big players have stiff-armed the YouTube seduction: Viacom, which owns Comedy Central, MTV and other cable channels, sued YouTube last year claiming copyright infringement of clips from popular shows. NBC's flirtations with YouTube and Apple's iTunes ended in 2007 amid disputes over how to price pay-perview offerings online.

Hulu, which debuted in March after a five-month, invitation-only beta testing period, delivers free content to users; its revenue will come from advertising on the site and so-called video ads embedded within programs. The mantra for many new sites is to make content available "when, where and how" users want it. To that end, Los Angeles-based Hulu has forged partnerships with AOL, MSN, Comcast and Yahoo. In addition to content from Fox, NBC and major movie studios, Hulu features programs from a growing partner base that includes Bravo, E! Entertainment and USA Networks.

Kilar's passion, he says, is to create an unparalleled user experience, in part by making the site as easy to use as old-fashioned television. Having run Amazon's worldwide application software and North American media businesses--the latter includes the company's book, music, video and DVD properties--he brings the right mix of technology and marketing experience to the job. The early reviews on Hulu.com are promising: The site features a clean design, intuitive navigation, and bells and whistles aplenty, including streaming high-definition content.

In a YouTube world, where anyone with a video camera can aspire to become the next Scorsese, content is no longer a linear push from creator to consumer. The most popular Web 2.0 sites enable individuals to control the viewing experience. Capitalizing on this trend, Kilar points to the ability of Hulu users to share and embed full-length videos and clips in Web sites, emails and blogs.

Hulu faces a host of challenges, not least of which is stiff competition in an increasingly crowded online video market that includes its owners' other Internet properties, such as Fox.com and NBC.com. In addition, Hulu will be run as a joint venture between wizened network competitors, raising questions about their collaboration skills.

There are plenty of reasons to cozy up. U.S. online ad spending is expected to virtually double from $21.4 billion in 2007 to $42.0 billion in 2011, according to research firm eMarketer. Online video advertising--the fastest-growing piece of the pie--is projected to more than quadruple to $4.3 billion in that time. In addition, after more than a generation of market-share erosion, there's manhood on the line as the networks attempt to prove they can translate their creative expertise into the fluid online distribution space.

"Partnerships, revenue models ... everything's up for grabs," says eMarketer co-founder and CEO Geoff Ramsey. "Whatever it looks like today, we will look back and say that we had it wrong."

Kilar says that while there's no shortage of input from his network bosses--News Corp. President Peter Chernin and NBC Universal chief executive Jeff Zucker--the relationship is at the board level and the moguls have ceded Hulu a high degree of independence.

"Fox and NBC have given us a tremendous amount of responsibility with their most prized assets--their content," Kilar says. "They have done a fantastic job stepping back and enabling this embryonic new company to thrive."