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QZ&A

Hulu CEO Randy Freer on how streaming video will replace TV

Sami Drasin
CEO Randy Freer is leading the Hulu through a pivotal moment in streaming video.
  • Ashley Rodriguez
By Ashley Rodriguez

Reporter

Published Last updated This article is more than 2 years old.

The battle lines have been drawn. And Hulu CEO Randy Freer is standing smack dab in the middle of them.

Hulu has always been a double agent in the streaming-video revolution—it’s an alternative to traditional TV, but is owned by legacy media companies. After a flurry of M&A activity, 60% of Hulu is now in the hands of the Walt Disney Company, 30% is owned by Comcast, and AT&T has the remaining 10%.

Those owners are also placing other bets on streaming video that could compete directly or indirectly with Hulu. Disney, which launched a subscription service for ESPN this year, is preparing another video platform that will encompass its most popular brands such as Star Wars, Marvel, and Pixar. And WarnerMedia, newly absorbed into AT&T, is building on the success of HBO with another service that would include more WarnerMedia brands.


Check out the rest of our deep dive into the future of television here, including the state of play, and an inside look at Netflix’s balance sheet.


Hulu, meanwhile, is coming off a landmark year, surpassing 20 million subscribers thanks to series like The Handmaid’s Tale, and its 18-month-old live-TV platform. Few understand the complexities of the industry better than Freer, who spent 20 years overseeing TV networks at Fox and is trying to forge a path for Hulu—and the future of TV.

Quartz: Disney, Fox, NBC, and WarnerMedia are all getting into streaming video. If studios start saving their best series and movies for their own platforms, how will it affect the mix of licensed content on platforms like Hulu?

Freer: One of the benefits of our ownership structure is that we have access to studios that make the best content in the world. Each one of the various offerings that come out are all going to have some version of a more narrow audience proposition. We at Hulu look at ourselves as an aggregator of the best content today.

A good example of that is, we have a fair amount of subscribers who are families. We look at that as a great opportunity for us to be able to package the kids content that we have for our subscribers and bring, either on a wholesale-level, or an up sell level, or as a premium buy-on for many households, the Disney app that will drive more kids usage.

So I don’t think they’re mutually exclusive from this standpoint. Our ability to create personalized and curated experiences of content for consumers is not going to be blocked by a Disney app or a WarnerMedia app or any of those things.

Are you planning to bundle those upcoming offerings with Hulu?

We’re looking at all of our options.

One of the themes in this series is choice. Can there be too much choice?

The real opportunity is discovery. It doesn’t really matter how many episodes, or how many hours of great TV there are as long as we and others do a tremendous job at surfacing the right content for individuals. One of the biggest things that we will all focus on over the next few years is that discovery of content. Discovery is going to be such a big part of this, particularly voice technology.

Tell us more about voice.

Voice will help consumers get to what they want—or don’t yet realize they want—faster. Not only does it remove the friction of clicking through a remote, but as voice technology becomes more sophisticated, consumers will be able to navigate to content in much more organic and surprising ways. Imagine sitting down in your living room this weekend, saying, “I feel like watching a good tearjerker tonight,” and within milliseconds you get the perfect movie options based on your tastes, the actors you like, and what your friends have enjoyed. That’s a great experience.

What other problems does streaming TV need to solve?

The economic challenges around live, and what we need to do to drive a better consumer experience.

Can you expand on that? How does live TV need to evolve?

What we have found very quickly is, live TV is very popular, but what really is watched on a live basis is news and sports. When you think about this word, “live,” I’m not even sure why we call it live. NBC on Tuesday night is not live, it’s scheduled. We don’t think we need live, scheduled feeds of channels.

Then, we have to get different offerings and different bundles of content to consumers in ways that make sense. The industry needs to listen to consumers’ desire for more curated packages of live networks and on-demand channels built around interests like sports, news, movies, family programming, animation. The reality is, we’ve had 35 years of cable networks—80% of them nobody watched or cared about—and those networks are going away.

What is user experience lacking right now?

The user experience starts with speed to video and ease of discovery, and that needs to continually improve with better integration of local information—news, weather—and faster navigation—enabled by voice and AI. But it’s also about the ability to curate and personalize that experience. For example, offering more ways to customize your content bundle. Right now, streaming video providers are limited in what they can offer customers because of the legacy business rules that currently govern content. The industry needs to get to a point where we can begin to break up and reconfigure traditional pay TV bundles.

What is the next evolution of the data and how it is used?

Data comes into play because we can use data to inform navigation. What do consumers do? How do they navigate through the app? How do they find their content? That information will allow us to continue to iterate and evolve our user interface, to evolve our customer service, to evolve all of the things that should put the consumer in a place where hopefully they get to the content they want to watch more often, and find more of it.

Hopefully, in this process, we will be able to better monetize our ad inventory with less commercial interruption, less advertising.

How does that work?

The more effectively we can target and reach the right consumers, the higher value that creates for brands, and that enables higher ad monetization for Hulu. Higher ad monetization will give us more flexibility to create an even better ad experience for consumers—with fewer commercials, less repetition, and more creative and unique ad formats. In fact, over the next three years, we’d like to reach a point where at least half of Hulu’s ad revenue comes from non-traditional advertising that is more engaging for consumers. And all of that will be powered by great data.

How are you seeing the market for talent evolve as more big media and tech players get into this space?

The marketplace is certainly heated. What’s happened is you’ve seen already cable networks have to back away from this competition. You’ve seen broadcast networks to some degree have to back away from this competition. So, I think you’ve moved the streaming services to the top of the funnel along with HBO and others, and that’s where that competition gets created.

There’s some good that comes out of that as well, because I think the creators are now getting a larger share of the total economics of the content.

Where is the next phase in innovation in streaming video going to come from?

Three areas. The first is in the user experience and how we continue to evolve that to make the consumers have more options, choice, and be in control.

The second is in the discovery of content, more voice, more recommendation engines, and the ability to get consumers what they want, how they want it, when they want it.

Then, the third area of innovation is really about breaking or evolving all of the business rules that have been created over the last 35 years that make it more difficult to get content to the consumer in a way that they can watch it. How we can break up bundles? How we can get through the morass of cable MFNs 1? All of the things that make it harder to innovate in that experience, in that bundling process, and giving the consumer choice and control.

1
MFNs, or most-favored nations, are terms borrowed from international trade. In TV, the clause means programmers have to offer all of their distributors the same deals. So, if a company like Scripps Networks licensed HGTV to Hulu for its basic package without sister networks Food Network and the Travel Channel, it would have to offer the same deal to every other TV provider it does business with, from Comcast all the way down to Philo TV—effectively eliminating Scripps from the basic bundle. “It killed innovation,” Roger Lynch, former CEO of Sling TV and current chief of Pandora, told Quartz. “The pay-TV industry is one of few industries I can think of that has grown to a point of maturity and even started to decline without really any market segmentation, because everybody's product and package is the essentially same. Similar number of channels. Similar price point. And it’s all driven by the MFNs.”

Is there anything else?

Twenty-five to 35 years ago, everybody started cable networks and it was a linear feed and there was a scheduled feed. Fast forward to where we are today, everybody’s going to launch some version of what their app is, or their content is. It’s almost like everybody had a website and put content on it.

You’re just going to see a very different future of what content looks like in the home and the ability to give consumers control of how they use it, how they view it, the freedom to move it around, the freedom to have it on any device. All of that is going to drive the benefit that this industry is going to see. As we evolve, the ability to do live and on demand, to combine the experiences so that we can be the first choice for video in the home is going to be super important.

This interview was conducted in person, condensed and edited for length and clarity, and contains information from a follow up email conversation.

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