Hulu’s Competitive Advantage: Market Channels

Hulu was able to create a superior augmented product in part thanks to the unique advantages of the distribution channels in its ecosystem.

In addition, Hulu’s channel design was near-optimal in its length and breadth: it was able to position itself to be accessible to over 96% of U.S web-audience thanks to distribution partnerships with AOL, Yahoo!, MSN and MySpace (also owned by NewsCorp), with minimal intermediary “layers” – people could view Hulu videos directly on these third-party sites without having to go to Hulu.com itself, or an authentication or login process (through a pop-up window, for example) and users could share and embed Hulu videos onto their own private sites such as blogs, without contractual or technological constraints, thus widening the distribution net. In addition, videos were streamed and therefore the added task of ‘downloading’ was by-passed in preference for immediate product accessibility.

Having such a large customer base (anyone in the U.S with internet access and a desire to watch premium video content) allowed for numerous and diverse channels to the market that built upon both direct (Hulu.com) and indirect distribution (third parties) strategies. Also, the fact that Hulu’s market segment were people who already used or accessed digital products and/or content meant that customer ‘education’ and/or awareness in using Hulu’s intuitively built site was also not necessary, thus the need for a massive sales force to offer pre- or post- technical or service assistance could be eliminated, and Hulu could begin building personal customer relationships using its initial staff of 9 people, plus an intern.

Last but not least, the fact that most of the supply chain – from content producers (studios) all the way to third-party distributors either did not have competing functions or products with Hulu (or were part of the same parent companies) helped integrate a congruence of goals to the whole eco-system that made it a streamlined and highly successful business model to initiate.

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