One of the interesting claims made by the hard core Membership First crowd inside the Screen Actors Guild is that start up companies in the new media environment such as Hulu are beginning to rake in huge profits and that that is sure to destroy the living standard of working actors.
Critics of that position point out that new media is hardly a blip on the radar of the studios as of yet and when it comes to profitability there is nothing to be found.
It seems that the hard core SAG types are unaware of the kinds of rhetoric used by startup companies to bring on media attention, drive users to their sites and win the hearts of investors. In securities law, this is called “puffery” and it is not illegal if it is the type of language that sophisticated investors can see right through.
Hulu is currently the subject of this kind of puffery and sadly the SAG hard liners can’t seem to see through it. Thus, they have put all their chips down on making incremental gains in new media, practically tearing their union apart to do so, while ignoring the huge real cash cow that keeps the studios humming, DVD revenues.
The Financial Times recently estimated that DVD revenues bring in $24 billion to the studios while new media revenues worldwide are only $200 million.
And of course that $200 million is only the top line number. Hulu advocates used a similar approach to bolster their numbers. One web based source said Hulu had “made” $12 million. And SAG sent out an email to its members contending, with no basis whatsoever, that Hulu had made $12 million in profits.
Neither was correct.
Apparently the source for the $12 million figure was a report on All Things Digital that Hulu was “profitable.” That author now has apologized and explained that he misunderstood the research he had reported on (readily available from Screen Digest, an industry analysis team) – he admits what the Insider pointed out – this was a “gross profit” number not “net profit.” Sure, as this article from Silicon Alley Insider notes, so-called “net revenue” is positive – but that’s just gross revenue minus “cost of goods sold.”
In fact, there is nothing left over when you reach the bottom line. Less than zero, in fact, as the Insider notes. The same research indicates that You Tube is not making any money either!
In fact, it would be considered anathema at this stage if Hulu were NOT losing money – that’s what startups are supposed to do, even when hatched by big players like NBC and News Corp, as Hulu was two years ago. They should be losing money in order to expand.
Naturally, SAG should fight for union jurisdiction over new media. But one has to wonder why they have left the 600 pound gorilla in the room, DVDs, on the table untouched.