Hulu expects long ride on online video wave

Loved and feared, Hulu — the online video service that offers free streams of episodes of such popular TV shows as “Glee” and “The Office” — commands more than 43 million users.

Hulu’s rapid rise since its launch in March 2008 has provoked shudders in Hollywood, where it’s feared the website is teaching consumers, especially younger ones glued to laptops, to expect easy access to TV’s best shows — all for free. And that, providers fret, will only encourage people to drop their pay TV subscriptions, which pays for the enormous cost of producing sitcoms and dramas.

FOR THE RECORD:
Hulu chief executive: In Thursday’s Business section, a question-and-answer with Jason Kilar, chief executive of Hulu, described him as a founder of Amazon.com. He was a senior executive at the online retailer. —

Some Wall Street analysts foresee Hulu destroying the economics of the TV industry and have called for its quick demise. Yet it thrives. Last month, the Los Angeles-based company, a joint venture of News Corp., NBC Universal and the Walt Disney Co., rolled out a $9.99 subscription service, Hulu Plus, that offers shows in high definition, along with full seasons of episodes. Hulu executives decline to say how many people have signed up, but claim they’ve been overwhelmed.

“We’re working through the backlog of people who want to subscribe,” said Jason Kilar, chief executive of Hulu. He noted Hulu just wrapped up its third consecutive profitable quarter. In 2009, the site raked in more than $100 million from advertising and “we have exceeded that amount already this year.”

FOR THE RECORD:
Jason Kilar, chief executive of Hulu, was described as a founder of Amazon.com. He was a senior executive at the online retailer.

Kilar, 39, who helped found Amazon.com, was coaxed out of a very early retirement three years ago to build Hulu. Company Town caught up with him this week.

Cable TV providers have given the media companies that own Hulu grief because it offers shows for free that cable subscribers must pay for. Who will win out: the network beholden to satellite and cable providers, or the want-it-for-free demands of the Internet?

The only way that great services work is for all the customers to be served. For Hulu that means three different customers: users, advertisers and absolutely content owners. It has to work economically for content owners, it has to work for advertisers and it has to work as an overall experience for users.

Skeptics think the original plan for Hulu Plus was for it to supplant the free service.

No. The service that we built today was absolutely the way we intended it, and you should expect to see it going forward. Hulu Plus provides three things unique to Hulu Plus: One is more content, the fact that you can get season passes to all episodes from the current season for over 40 of television’s top programs. The second is device access, the fact you can watch it on mobile device like tablets, iPhones, Internet connected TVs and gaming consoles. The third is high-definition.

Why do you believe the free Hulu site will prosper? And who decides which shows go on which service?

The free, advertiser-supported service is going to have the most consumers because it is free. Content owners are ultimately going to be the ones to decide how best to monetize their content. There is going to be a class of content which will be best served through a subscription service. That’s what Hulu Plus is about. There will also be a class where the content owner is going to make the decision because it is economically better for them to go into a free ad-supported service. That’s a function of the amount of revenue that they will get from advertising to as many people as possible.

In five years do you think more people will be watching TV on the Internet than on cable and satellite?

In the fullness of time — and this is something that clearly will take many, many years — the leading form of distribution for premium content will be through the Internet. What that doesn’t mean is that people will stop watching content in their living rooms. It will be complemented by access over mobile devices, computers and screens that haven’t yet been invented.

There is a lawsuit that alleges the name Hulu was stolen from an inventor named Hula. Is there anything that you can say about how you came up with the name Hulu?

We don’t comment on any litigation. But if you look at the history of the name Hulu, and how we came up with it, it was four of us here at the company who were debating names. We actually chose the name Hulu because it comes from a Mandarin word that means gourd. We used it because there is a parable in China that describes the hulu as the holder of precious things. We wanted to choose a name that didn’t have any baggage associated with it in addition to a name that had some evocative meaning for what we stood for, and we very much wanted to build the holder of precious things.

We presume you watch TV on the computer. What are your favorite shows on Hulu?

I watch an eclectic mix. I certainly watch “ 30 Rock,” “The Office,” “Saturday Night Live,” Rick Steves, who does travel shows in Europe. I also watch old Super Bowls. I was raised in Pittsburgh and we have NFL Films archives on the site. Pittsburgh vs. the Dallas Cowboys, those are two Super Bowls that I can’t get enough of. And I watch a bit of Charlie Rose on the service as well.

meg.james@latimes.com