Hulu do you think you are?

hulutm_130_white_over_blackWhen I saw Alec Baldwin pop up today as a spokesperson for Hulu in the late stages of the Super Bowl, I knew there would be trouble. I turned to my wife and said, wanna bet how long it takes a shill from Membership First to malign their fellow union member for doing a decent bit of work on behalf of the new media entity jointly owned by NBC/Universal and Fox?

It didn’t take long. The attack has already started over on SAG Actor Bulletin Board, the MF-sympathetic website. 

Why does this matter? Because the manner in which the Hulu has been analyzed by SAG in the ongoing contract stalemate goes to the heart of the argument about New Media and actors’ compensation.

Under Doug Allen SAG argued that Hulu made $12 million in profits in 2008 and that it is therefore an example of how the studios are already making “billions” in new media (according to MF front man Arlin Miller).

In fact, as it turns out, MF’s accounting leaves quite a bit to be desired. As I have blogged in some detail (here, here, and here) Hulu does not currently make a profit, it did not make a profit last year and has not since it was founded in 2007, and, just to make the point, it likely won’t make a profit for the next few years, according to analysts like Henry Blodgett of Silicon Alley Insider

The idea that Hulu made a profit of $12 million last year is actually an urban myth that spread on the web and that, unfortunately, SAG picked up and used uncritically. It turns out that Hulu made $12 million, approximately, in “net revenue” last year, which is, of course, very different than profit since that figure does not take into account actual operating expenses. The $12 million figure was published in an analysis by Global Media Intelligence. I obtained a copy of that report and confirmed the $12 million figure – but it turns out their analyst did not make a mistake – he reported it as “gross profit” which is, of course, the same as net revenue. It was the Wall Street Journal that tried mistakenly to report this as actual profit. When the WSJ learned of their mistake they published an apology. 

But that did not stop SAG.

In fact, Blodgett concluded the bottom line profit of Hulu was a big negative: $22 million. Other industry analysts expect the red ink to continue flowing for several years.

Why? So that Hulu can continue paying actors like Alec Baldwin, and the other SAG members who appeared in the commercial today, to help build up Hulu’s reputation and presence in the wider market place. That should help them win ad revenue and, in turn, allow them to license in from NBC and Universal and Fox and other 3d party providers all sorts of content that it can make available to viewers.

That is good for SAG since that content is unionized and, even under the controversial New Media template currently on the table, would pay residuals to actors for web streaming (albeit a marginal amount for the first year but a fairly good percentage thereafter).

Sadly, Membership First still does not get it. (Fortunately the new team at SAG does: the link to a press release with the Hulu profit allegation is no longer available on the SAG website.)