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On Hulu vs. Boxee

Today, Hulu reminded us who’s the boss. The Wall Street Journal reported this morning that Hulu had pulled its content from and Boxee, which is a venture-backed Israeli company. Hulu CEO Jason Kilar explained the decision on the corporate blog arguing that content providers requested the move. He wrote, honestly I’m sure, that “the maddening part of writing this blog entry is that we realize that there is no immediate win here for users” and that Boxee users are “likely to tell us that we’re nuts.”

Boxee wrote an impassioned defense of its business model on their blog. Fred Wilson, one of Boxee’s investors, wrote about the issue on his blog as well. More significantly, ZDNet weighed in on the issue, calling the decision Hulu’s fantastic suicide. “The old guard media companies” wrote Jason O’Grady, “just don’t get it.” On Twitter, the buzz is overwhelmingly pro-Boxee, which is not surprising given the excellence of Boxee’s offering and the general tendency of users to prefer openness.

hulu_logo_2            TV Guide                  boxee_logo_122308

So let me make two points: First on Boxee and then on the Hulu decision.

  • Boxee. Boxee remains, to my mind, one of the more interesting companies to come out of Israel recently. The concept of a browser optimized for the ten-foot lean-back (TV) experience is a good one, a necessary one, and a profound one. Boxee delivers to it’s users something they can not get anywhere else – a great user experience on an open platform with a UI that can be managed from a remote. Boxee is the Firefox of the video web. Boxee democratizes and frees the internet-TV experience. It enables internet video content to be effectively consumed on lean-back devices, it allows PCs to be transformed into TVs, and it allows an ecosystem of applications and widgets to be built for the lean-back video experience. Boxee should be tremendously interesting to players like Microsoft and Apple (who’s “soft TV” efforts have not gained meaningful traction), for content players like YouTube and Hulu who want to reach beyond the PC, and for equipment makers like Panasonic, Hitachi, and Sharp who are busy making their TVs “internet enabled” but have not yet given the consumer a reason to care. I have tremendous confidence that Boxee’s team will be able to steer the company towards a business strategy that will enable them to capture some of the value that Boxee’s model unlocks. Hulu’s move is bad for Boxee. But more than anything, it shows that Boxee is on to something important.
  • Hulu. And now for Hulu’s decision: Hulu is not nuts. As much as we denizens of the web correctly proclaim the benefits and inevitability of openness on the web – we can not and must not ignore market reality. The studios (content owners) have invested tremendous amounts of money and intellectual capital into producing content that we very much want to watch. They own that content. There is no principal (economic, moral, or otherwise) that suggests that they should allow anyone to freely consume that content just because our TV screens and laptops are attached to an IP network. They have every right to demand that the viewer pay, and they have every right to seek to control the flow of advertising dollars that is attached to that content. More importantly, if Hulu believes that its ownership of desirable content can be translated into a direct (and valuable) relationship with users – it has every reason to try to control access on its own. Right now, Boxee needs Hulu more than Hulu needs Boxee. The tech-savvy among us can protest by going back to BitTorrent, but most likely we’ll just go back to for now. it’s easier, and the interface is better.

So what happened to openness? Openness is not an objective in and of itself. To be sustainable, openness needs to create value for users that can be captured and shared with the content owners. I believe that will ultimately be the case here. The key is specialization. NBC Universal is specialized in content creation. Boxee is specialized in user aggregation through a superior browser-based user experience. Hulu sits in the middle and needs to decide if its going to focus on content aggregation and advertising, or if it’s going to reach out and try to own the user relationship as well. In the end, players like Boxee and Apple are probably going to emerge as winners in the user game – and are going to be in a better position to cut deals with the Hulus of the world. But for now, Hulu is facing a huge opportunity to own the user, and quite rationally, it seems like they’ve decided to give it a shot.