For the past four years, you’ve been able to watch TV on Hulu without ads — if you’re willing to pay $12 instead of $6 for your monthly subscription. And while that option is no secret if you’re signing up for Hulu, the company has made a point of never advertising that it exists, CEO Randy Freer says.

“I think what you’ll see now over time is you’ll start to see us probably roll out a little more promotion, a little more opportunity, to bring no ads more to the forefront,” Freer said on the latest episode of Recode Media with Peter Kafka.

So, why was “no ads” not a selling point for so long? For Hulu, which is jointly owned by Disney and NBCUniversal*, the most important goal was to get a lot more people using the service, which Freer said it has done — from 13-14 million subscribers in late 2017 to 28 million today. But the company is still losing money every year; Disney, which owns the majority of the company now that it has acquired former co-owner 20th Century Fox, expects Hulu to be profitable by 2023 or 2024.

On the new podcast, Freer positioned the plan to start advertising the more expensive Hulu No Commercials plan as an appeal to consumer choice — and said he’s fine with people changing their plans around throughout the year.

“About 60 percent still come on board for the ad service,” he said. “I think the most important thing there is choice, and when you give people choice, they are much happier with their opportunity and then, ultimately, their decision … [W]here we’re driving this and why we think now is the time to do this is because we see people moving from ads to no ads, from no ads to live, from live to no ads, from no ads to ads at any given point in time over the course of a year, depending on what their viewing habits are.”

* NBCUniversal is a minority investor in Vox Media.

You can listen to Recode Media wherever you get your podcasts — including Apple Podcasts, Spotify, Google Podcasts, Pocket Casts, and Overcast. On the latest episode, you’ll also hear a mini-interview with Vanity Fair writer, podcast host, and Game of Thrones expert Joanna Robinson.

Below, we’ve shared a lightly edited full transcript of Peter’s conversation with Randy.

Peter Kafka: Randy Freer, CEO of Hulu, which is now a partner with Vox Media. We should get rid of that disclosure right away.

Randy Freer: Oh, that’s right.

You guys are going to give my bosses and eventually me, maybe, some money? It’ll trickle down.

Well, I guess that’s one way to look at it. Sure.

That’s how I think about it.

I look at it as you are going to provide us a great opportunity to partner with David Chang and Momofuku and a number of other food content partners providing a show and we’ll pay for those shows.

So Vox Media is going to make a show, it’s going to appear at some point on Hulu with David Chang. Are we also doing a Crissy Teigen show? I was confused about that.

It’s interesting. It is two separate paths. One is with Vox Media Studios for food content, where David Chang is going to curate a number of food shows, the first one being Family Style, which will actually have both David and Crissy in it.

Okay. I didn’t want you to come on to talk about the David Chang show, though I’m happy to talk about it.

That’s what I expect to talk about for the next hour.

I figured we should get that out of the way. What other disclosures should we do? Comcast is a minority investor in Hulu, they’re a minority investor at Vox Media. And I pay Hulu about $45 a month for live TV.

We love that. Thank you.

I’m one of what, a million people doing it?

A few more than that.

Yeah. You had your Upfront presentation yesterday. You put up your numbers, you’ve got 28 million subscribers, that’s up from 25 million at the beginning of the year. So that means you’ve grown quickly.


As many people have pointed out, that means you are growing more quickly in the US than Netflix, you’re about half the size of Netflix. I’m not sure that comparing you to Netflix is necessarily helpful, but it’s interesting. And I want to talk to you about everything about Hulu and your experience in TV. You’re a longtime Fox guy, now you’re a Disney guy, post-acquisition, and what the future of TV is going to be like.

Let’s start off with your childhood … I’m kidding. I think Hulu, over the years, has been a really interesting company to cover and that sometimes, it seemed like it was going to go nowhere. The backstory is, this was created by Fox and NBC as a YouTube and Apple hedge and it was that it would fail and it worked tremendously. And then there was a long period where the two — where Disney, which became an investor and programmer, and Fox couldn’t seem to agree on what to do with the product. It seemed like it might go away or get sold. Which is a long way of saying, now it seems like it’s going in a whole different direction. You’ve been at Fox forever?



Yes, I was there for 20 years.

So you’ve had a front-row seat, right? Both as a Fox employee watching Hulu grow, eventually you were on the board and now you’re running it. Did you see … When Hulu was created, this was, what, 2006-2007, what did you think was going to become of that product?

It’s interesting. In 2006-2007, I was on the sports side, so wasn’t directly involved with the conversations around Hulu or the entertainment. The one thing that did spread was, I think Peter Chernin, as always, ahead of the process and ahead of the game, working with Zucker, Jeff Zucker …

Former … Basically ran Fox for Murdoch.

… and really trying to establish this opportunity to ford, hedge, whatever you want to call it, against YouTube monetizing and monopolizing digital video. What happened in that scenario, what spread a little bit was the internal strife between, ultimately, the cable group of, you’re selling content to someone else that is going to ultimately be the thing that breaks the best economic model in a long time, the cable bundle, and there was that debate. But Peter was pretty strong in his desire to keep it separate and push forward.

Yeah. It’s a core thing that I always think is the most fascinating thing about watching media companies figure out the internet, is that channel conflict, right? You’ve got an existing business, it’s under threat. If you step back, one good way to take on that business would be to radically change your business, but you don’t want to change your business because it’s generating a lot of money, but you can see over the years it’s going to decline. It’s kind of the story of all these different media companies in different industries. But you were specifically saying that the people within the networks thought, but then the programmers would worry that Hulu would undermine their own business. Do you want to tease that out?

Yeah, look, I think when you’re in the cable business and you’re selling your product to cable companies like Comcast and Charter and others, you want to keep that wall up so that …

So you’re selling to Comcast, the world, the right to distribute Fox Network and everything else?


And then on Hulu, it’s free.

Back then, it was free.

It was free the next day. You can watch The Simpsons the day after it aired on Hulu for free. It was an amazing consumer product.

Right. So on one side, you have selling this product and then distributors selling it to customers. On this other side, now you’re making it available free with a 12-hour delay and some other hangups there. So clearly, why should someone pay all this money for it if it’s going to be available for free?

And the thought was, “We’ll do that because it’s better us doing it than YouTube doing it.” Right?


It’s, again, hard to remember, now that we think of YouTube as a place to get radical misinformation. But for a long time it was considered an existential threat to the media companies, much less so now, that part’s been tamed. But that was Lazy Sunday and all this stuff from the TV is going to show up on YouTube for free and rampant piracy and Viacom’s suing them. And your thought, the media companies’ thought, was, “We’re going to create our own version of YouTube”?


What did you think of that idea?

Again, I was on the outskirts of it, so to me, I was more concerned, particularly in the sports business, with, we’re selling sports and other properties …

For a lot of money.

… to cable operators for a lot of money, why would we do this on one side for free? But you also saw early trends of how consumers were using media. You saw many of the things that were beginning to happen. I think Peter, again, was prescient enough to know that one of the goals is to stay one step ahead of the disruption so that you can control, you can adapt, you can do things that allow you to move your business forward in a manageable way versus just complete chaos. So we all looked at it and took a deep breath and said, “Okay, here we are and here we go. We’ll also find opportunities to make sure that the voice was heard and here’s this business over here, let’s not do too much to damage it.” And I think that’s …

That was what generated, I think, some of the back and forth with Hulu’s CEO at the time, Jason Kilar. He was at one point, he put up this manifesto, which is basically taking on the networks that owned him. That was quite, it was kind of a Jerry Maguire letter, it was great.

Yeah, it was a bit aggressive.

It was great to read about, great to write about. At what point did you join the board of Hulu?

I joined the board, I believe it was either 2012 or 2013.

Okay, so relatively recently.


In between that, there were a couple different times where the owner said, “We’re going to sell Hulu,” and then would come back, “No, no, we’re going to invest money in there.” And, again, I know you weren’t directly involved, but what was going on there where ABC and Fox were saying, “Someone else, just take this over”?

I really wasn’t involved at that time in those conversations or those decisions, it was more in the grandstand, watching. I think the owners, at that point in time, were trying to determine what was the best path for Hulu? I think they started to see that it was challenging for all of them to come together and really drive that business. Not because they didn’t necessarily agree, but as much because when you’re investing in something like that you want to get the benefits of it. And when you have three companies that are in that mix, it’s hard to go all-in, knowing you’re not going to get all the benefits of that move. I think they were just trying to make what they thought was the best decision for each of those public companies and for Hulu at that time.

Now it seems like … we’ll talk a bit about what Hulu’s future is going to be and you won’t tell me that much, or as much as I want to hear. But it seems like …

I thought you were going to tell me.

It seems much clearer, right? Hulu is now controlled by Disney which acquired Fox so it has the two-thinds ownership, Comcast remains an owner. It seems quite clear to me that eventually they’re not going to be, but Disney controls Hulu. It has a couple different products. There’s one where you subscribe and get access to last night’s TV and other catalog stuff and originals like Handmaid’s Tale. Then there’s this live TV thing that I’m paying you 45 bucks a month for. You guys did this big Disney direct to consumer presentation which was mostly focused on the Disney+ product, but they made a point of giving you a bunch of stage time, so Hulu’s obviously important to Disney’s strategy there. So it’s a thing they’re going to keep and build.


Yes. Good for you?

I think so.

Did you have any question about whether you’d be staying on when the Disney deal was announced?


Because you were at Fox at the time?


Or you come from Fox?

I do.

So you’re a Fox guy. Was there a concern that maybe …

I’m a Hulu guy. I’m a Huligan, at this point.

You’re a Hulu guy. But was there concern, “All right, maybe Iger’s going to bring in his own guy for this?”

Again, Disney, or our others, the board can bring in their own guy whenever they want. I think, at this point in time, all signals are that we’re moving in the right directions. They’re happy with the job that we’re doing at Hulu and growing the business. So I haven’t had any conversations about being replaced.

No taps on the shoulder?

No. Look, like all of us, we know that, at any point in time, somebody can come in and say, “Look, we’re going to make a change.” That’s just the nature of the beast.

So the two ellipses that you guys have …

Not exactly where I thought we were going to go today, into my ultimate demise.

I think you’ll be fine. We actually don’t cut anything out. We’ll leave it in there.

No, no, it’s fine to leave.

At the Disney announcement, you guys said, “We’re looking at international expansion and there’s probably” — I can’t remember the hedge word he used — “but we’re probably going to bundle Hulu with Disney+ and ESPN+.” When will that become, first of all, is that clear internally what you’re going to do and you just don’t want to talk about it publicly, or are you guys still thinking it through?

I’ll take the latter first. On our bundling of Disney+ and ESPN+, we are still working through, with Disney, what we believe and they believe will be the best consumer offering around those two, well, three services ultimately, Hulu and Disney+ and ESPN+, so we’re still finalizing what that is going to look like.

Is there complexity there? It seems pretty … because you guys already do a lot of bundling with other people, like I can do … Spotify deal, right?


You guys do lots of deals with lots of different people, where if you pay Sprint or Spotify or someone, X, you can get Hulu at a steep discount or free or vice versa.

Yeah, there’s always, one thing you learn very quickly, there’s always engineering work to be done and the more complicated you get in your offers, each one adds a level of complexity for your billing systems and everything else that go along with it. But we certainly figure all of that out.

You get paid to do that.

Right. It’s just really determining what’s the best offer for customers, not only as a Hulu, but I think ultimately, as you saw, Disney+ in particular has pretty impressive service and wants to make sure that when they launch, and when they roll that they are really elevated to a point and the consumers can figure out, “Well, okay, how does that work?” So I think it’s a combination of final determination of what the best consumer offer is.

You say they want to elevate it, that means they want to make it a giveaway or a …

No, no, no. It’s a big product and with a ton of great content on it. It has the ability to stand on its own, it has the ability to be a huge consumer product for anyone, any family looking for video options.

And then the international stuff?

International is interesting. It is a hard challenge to solve, for a variety of reasons. And it is an expensive proposition, depending on which way you’re going to do. The one thing that we have really tried and focused on is having a reason for going international and having something that differentiates us, Hulu, from everything else that’s out there.

In most markets today, there are two if not three or four SVOD services between Netflix and Amazon and then local services in Latin America like Blim, what Claro has, or Rakuten, in other parts of the world, and then individual services on a market-by-market basis. And just chasing to be the third or second SVOD player in those markets is not necessarily, I think, our best option. So we are looking market by market, looking region by region and determining what is our best access point to customers. Might be straight-up, simple ad supported, might be other things that we do going forward. So that’s what we’re in the process of working through now.

But, I mean, I’m assuming that you are going to be international, right?

I think that’s a safe assumption.

Yeah, right, so it’s just a matter of what the product is and then how you go … it’s clearly the driver for Netflix, they’ve made a point. How much of this is just the difficulty in getting all the shows and movies, etc., that you have licensed available in different markets? Again, Netflix has made a point of saying, “Everything we buy from here on out, we’re going to have ownership across the world.” Generally, this stuff is chopped up territory by territory, it’s available on one service in one country, another service in another country.

We don’t see that as a difficulty in acquiring those things. A lot of that content comes from a variety of studios, some of which are owners. In that process, that’s more about the timing of when that becomes available, how much you can get. And it also becomes how important is US content going forward? Historically, it’s probably had a higher level of importance to services than it does today, still super important, still a majority of what is watched in a lot of places, but the local content has a much higher value than it did a decade ago. So it’s a combination of those two things.

Let’s talk about Comcast, let’s get that out of the way. I know that you will not tell me what’s going to happen to Comcast. Can you tell me what life is like with Comcast as a one-third owner today? For a long time, they were an owner but didn’t have the ability to manage Hulu, this is because of a US Department of Justice consent decree. But as of last fall, in theory, they could actually have a voice in the way Hulu was run. What is having them in the room for those discussions like right now?

I’ve been very lucky in my tenure at Hulu. Ownership, across the board — Fox, pre-Disney transaction, Comcast in that window of time — they’ve been super supportive. They have been aligned on investing in Hulu and trying to drive this business to scale and more customers. They’ve continued to be super supportive in that process.

And whatever happens, as it relates to the relationship between Disney and Comcast, we’ve seen nothing on the work front on getting what we need to get done, done, from an investment standpoint, from an alignment standpoint and from general conversations about what we’re trying to accomplish.

I think that the decree ended in late August or early September of last year. Let’s say, end of summer last year.


Did anything change once they could actually speak up at a board meeting and say, “Actually, … “

Nothing changed around our direction, our strategy, or the alignment of ownership. What did change is officially Comcast had … or NBCUniversal actually had three board members. So it’s a 10-person board including me, but a nine-person board. And they joined us in conversations, and in those conversations, again, they were incredibly helpful, they were thoughtful, and they brought a perspective to the table that had not always been there. Not so much because of NBCU or Comcast, but because of the individuals that have experience and have seen a lot of things over time in this industry that they brought to the table, and they were helpful in that process.

Hulu loses a lot of money. We know this because the owners have basically disclosed it in their public filings for a long time. I’m paying you 45 bucks a month for live TV. I don’t think you’re making any money on that, but that’s not the reason you’re losing money in general, right? You’re losing money because you’re spending a ton on marketing and a ton on buying shows, like you have to pay the networks that own you for the shows as well as creating your own stuff. I think it’s more than a billion dollars a year you’re losing, right?


It’s almost like an Uber-like loss, except for you’re not going public. So how do you change those economics over time?

Well look, I think you … first of all, Disney in the investor call put out this year we were going to apex our losses. I think they put out a number there and turn to profitability in ’23, ’24 is what the goal is.

That’s for all of direct-to-consumer, right, or was it just for Hulu?

That was for Hulu. And we’re on our way. I think we have a good plan in place to do that. But in this business, the most important thing in this window of time is scaling the company. Two years ago or a year-and-a-half ago we had 13, 14 million subscribers. We announced yesterday we had 28 million customers, about 26.8 of those pay, and then some promo subs that come on there that we make money on through ad revenue. So in that window of time we still generate revenue around those promo subs.

So that’s something that we’re going to continue to grow, and we need to get to a place where we’re in 40 million, heading towards 50 million subscribers, and more than that. Because like everything else, once you have that number of subscribers you have a flywheel effect that you can kind of drive. Some of our programming deals have certain caps in expense against subscribers, so that allows us to drive it.

Obviously, you can sell more ads, so that we can drive even the live side of the business in a way that does start to make economic sense in that process. So we feel very good about our strategy going forward, both from the standpoint of scaling and acquiring subs, getting those subscribers to spend time on the service, and then creating economics that allow us to drive the revenue and drive ultimate profitability to the business.

Can break down that 28 million number a little bit? How many of them are people like me paying you for live TV?

We haven’t disclosed that and we don’t …

It used to be … at one point you said there were a million people paying for that. I assume it’s more now.

We did at one point in time. We haven’t disclosed that really since then, but there’s a lot more than that now.

A lot more than that, but I assume the majority are getting the … you can call it the SVOD, right, the subscription video, older stuff plus The Handmaid’s Tale, etc.

Well it’s actually 85,000 episodes of television, so it’s a library plus all of your current broadcast television season programming, past seasons, originals, and some other things, movies and other things as well.

And then you have two tiers there. You’ve got an ad-free and then an ad-supported. I always talk about this. I’m always amazed that people are not paying the extra $4 or whatever it is for the ad-free. What’s the breakdown between that, people getting ads, people not getting ads?

Well, we find today, and it’s about … still a large number. About 60 percent still come on board for the ad service. I think the most important thing there is choice, and when you give people choice, they are much happier with their opportunity and then, ultimately, their decision. It used to be ad serving … or advertising used to be one of our top-three complaints on the service as to why I canceled or why I do this. And just by giving people an option of choosing ads or no ads, that dropped probably down to a top-six complaint in the process.

What’s the price difference between the ad and non-ad?

Right now, $5.99 for Hulu with ads, $11.99 for Hulu, no ads. And what’s interesting there is we have never advertised, never advertised Hulu with no ads. And I think what you’ll see now over time is you’ll start to see us probably roll out a little more promotion, a little more opportunity, to bring no ads more to the forefront.

We look at it as we’ve made a strategic bet and we’re going to drive this to be an ad-supported service, offer consumers both a lower price and a service that we believe has a good customer experience, a great customer experience, because we’ve capped ads at 90 seconds per pod. We’ve set frequency levels both on an hourly and a daily basis on what people can see, as we talked about yesterday. So we think we’ll have the best consumer experience for ads at a price that ultimately people will be okay with, and then we’ll start to drive the no-ads business as well.

So you’ve got this product that actually a lot of people like, that doesn’t have ads, but you have not gone out and told people about it. You have to sort of go to Hulu and find out about it.


My conspiracy theory has always been your owners make a lot of money selling TV ads and you don’t want to go ahead and undermine that business any more quickly than you have to. Is my conspiracy theory correct?

No, I don’t think … there’s never a conspiracy.


It’s always planning. We planned it that way. No. I think that there’s … two-fold on this, there’s two parts to that. One is we needed the economics associated with a dual revenue stream in subscription and ad revenue to drive the business, because we weren’t at a size that really allowed us to go and …

Right, you needed the ads.

But we needed the consumers to choose ads in that part — and we still do, and we still believe that’s a big business for us. It’s something that’s going to drive. Now, having said that, we now feel confident that we can promote … we can bring subscribers in.

You can grow more by … okay, so my conspiracy theory was correct, which is you didn’t want to push the no-ad thing too much, but now you think you can grow by pushing it.

Right. And again, it’s not … but your conspiracy theory was there was some ultimate outside force driving it. I think it was really just the business driving it. The other part of it is, what we’re seeing now is this whole theory of how you manage subscriptions, and where we’re driving this and why we think now is the time to do this is because we see people moving from ads to no ads, from no ads to live, from live to no ads, from no ads to ads at any given point in time over the course of a year, depending on what their viewing habits are.

One of the great things about Hulu and this business, and one of the challenging things, is it’s really easy to cancel. You can do it in seconds, and it’s also really easy to subscribe. And so if you’re thinking about it, we see it every — not every day, but we see it across the year. People come in for live and they come in in September, college football, NFL, others. They’ll drop it in February.

Do the same thing with specific shows?

I think they do, that’s more a live versus … I’m sorry, that’s more an ad versus no ad. If Handmaid’s Tale comes out or some of our other newer shows that are doing well, or a broadcast season, right? So September, October, where all the new shows are going to come in, we’ll see people … engagement goes up. We’ll also see them make some selections around moving to no ads in that process.

So people are very aware of what they’re spending and how to turn … because I’m pretty savvy about this stuff. It takes some work to actually figure out how to manage your subscriptions within iPhone. It’s much easier than calling up Comcast and telling them you want to cancel. But your point is people are very aware of what they’re spending, what the product is. They’re hyper aware of, “I’m spending this much money for this thing, and now I don’t want to spend it because that thing’s not here.”

Well, I think there’s a percentage of our subscribers who are very aware and move into different packages that are right for them at that moment in time, and then there are others that treat it as any other service. They’re going to have it, they like it, and they’ll move through it.

The old-style subscriber?

Right. I mean, what we also see is, in the add-on world, right, obviously we saw a big tick up of HBO subs over the last month because they can add on HBO. You go on and you can just add it on pretty quickly, and you get the next six or eight weeks of Game of Thrones. The majority of those subscribers who add on will stay with that service for the period of time that they want and are willing to deal with that.

But the number of people who are going to turn off HBO after Game of Thrones is higher with you guys than it would be for traditional cable distributors, and that’s the challenge for you guys. There’s more churn.

I don’t know the answer to that question or to that … the number of people who will turn off is higher than traditional pay TV, because I don’t know what their numbers are. But certainly it is easier if you want to, to change your subscription, click. You know, turn off HBO and add on something else, or just roll back to no ads or whatever service you may or may not want in that window of time.

So, ad free, with ads, live TV: those are sort of the main …


And then you can add on Showtime and HBO. You’re still fundamentally selling bundles of TV, just like you would get through linear TV. You go around in interviews saying, “I think the bundle is going away. I think that many of the smaller networks that are sort of on your cable dial aren’t going to have a reason to exist. They’re going to go away over time.” I agree with you. I just wrote a story that says that, but you’re in the bundle business and you’re owned by a company which is very much based around the bundle, right? Disney is still based around selling a bundle of TV to distributors. So how’s that going to work?

Look, we’re in the consumer business, so our job is to provide the best possible experience for consumers. And I think right now, we’re working towards that. We do a great job today. Rebundling is something that happens all the time. Netflix has rebundled content and created a service and a …

It’s a mega bundle but it’s 13 bucks a month.

Right. One of the things that Netflix has done for customers over the last decade is completely devalue the value of content to customers. Where it used to cost $120 or $100 to get all of this content, all of a sudden it’s like, “Wow, we have enough content over here for 13.” I think what people in this business forget is ultimately it’s not the distributors who create the bundle, right? The distributors want to get customers the best possible product they can for the best possible price. I think that’s the simplest thing that we try and do every day.

And media companies, historically, have been able to combine their assets, and combine their networks in a way, in selling them to us or Comcast or others, that have forced or created this need to carry a bundle of channels and put that out to the consumer. When you go back, even at a $100, $120, historically, there’s only about 50 percent of that cost is in content if you go back to traditional pay TV. The rest of it is some version of set-top box, DVR rental, service calls, profit for these companies, and other things that go into that. So I think the programmers, historically, have been blamed for the high cost of traditional pay TV when they’re not fully responsible for the high cost of pay TV.

I think it was either you or someone else put out recently, when you look at the RSN service charge, the local broadcast service charge …

Right, there’s a lot of …

There’s a lot of stuff in that …

If you have cable TV and you look at the bill, it’s full of gnarly stuff, but the main structure … this is the … I think people are getting more and more aware of, is — and Disney is sort of the prime example here, right? — is if you get cable TV you’re getting a bundle of stuff from Disney whether you want it or not, and the most expensive stuff by far is ESPN. It’s $9. They’re charging Comcast $9 just for ESPN alone, and then they make them get the Disney Channel, etc.

So you end up, with sports in particular, but a lot of the stuff … you end up paying a lot of money whether or not you want to watch the stuff. And you’re out there saying, “I think that bundle is going to go away, or at least change.”

It’s already changing, and I think if you look at the last five, eight years, most of the media companies have in some way, shape, or form narrowed their networks to the brands that matter. At Fox, in that window of time, it was Fox Sports One, it was the broadcast network, it was FX, it was National Geographic, it was Fox News. I may have missed one.

Right. We’re going to not make you take our most extraneous stuff.

Right. And if you think about Disney, they have huge brands in that window. You don’t have a ton of stuff, you have ESPN, you have Disney Channel. I’m sure I’m missing some others, but it’s a pretty robust brand opportunity that they bring to the table as one. I think some of the other media companies that may have 10, 12, 14, 15 different networks, right, they’re rationalizing their portfolio of networks as well.

Viacom is saying, “Now we’re focused on six networks,” etc.

Right. And I think this gets to the bigger challenge that companies have. Look, they’re publicly traded companies. They have shareholders. They have earnings. They have to manage their transition from a very wholesale, very traditional pay TV relationship business, while still supporting their shareholders, still driving their economics, versus other parts of the ecosystem, whether it’s Netflix or — you brought up others in the window that aren’t valued in the same way. So it is a transition. It’s not something you can snap your fingers and say, “Great, we’re going to break it up.

The other thing that’s important there is most research shows — and we’ve done a lot of it — bundling is important. Right? The ability to give a consumer a package of options, a package of channels, or content in this case, is far and away a better value than a la carte. If you have to buy everything you want as a one-off, you are ultimately going to pay more, and I think that’s the transition we’re heading to, where we will be able to rebundle or repackage content programming for consumers that will ultimately allow them to probably shave a little bit of cost and still get a lot of what they want.

Right. I keep … I know that there’s an economic … like a grown-up economics with a capital E argument that bundling can be a good thing for consumers as well. It’s obviously good for the distributors and programmers, but usually when the TV guys talk about this, they say, “Well, if you wanted to get everything you wanted you’d end up spending so much more a la carte.” But I think that assumes that there’s all this stuff that you want, and I think a lot of the stuff you probably don’t want, or don’t want that much or can find free equivalents or can live without. And again, in particular because Netflix and now you guys offer products for 12, 15 bucks a month that give you a ton of stuff plus free things from YouTube, plus free things from Facebook and the internet at large. It does seem like a lot. The bundle will get undermined whether or not you guys want to keep it intact.

I look at it probably in a different way. I think the package of content that we’ll provide to consumers will evolve, and they will end up … and they already have more choice and control today than they had yesterday. It’s really … it’s not a gatekeeper world anymore because consumers can make a choice. You have over 30 million people under the age of 35 that are cordless today, so people get to make choices today. People can buy a traditional, passive, pay TV experience. They can buy an on-demand experience. Or they can just have an ad-supported experience.

There’s lots of choices today. It’s already getting rebundled. They think oftentimes we focus a little too much on this one area, the bundle, because it’s been a very successful economic proposition for everyone. Quite honestly, it’s been a great value to consumers over the years.

Right, but for years …

You think about for $100 a month, you get every piece of television that’s ever made on your …

People of a certain age look at it and go, “That’s great. Of course I’m going to do that,” or, “How could I ever go without it?” You’d always hear people in your business say, “Well, the generation, when we were …” There was a period where people were saying, “The millennials aren’t paying for pay TV now, but they will as they get older, just got to wait.” It turns out they’re not. They’re just getting Netflix and Hulu and free stuff.

But that’s pay TV.


You pay and you get TV. Netflix is pay TV.


There’s a different version of pay TV.

They’re just not buying that $107 bundle. They’re buying a $13 bundle.

Right, but they’re also, you look at their subscriptions, and you add Spotify and you add Apple Music and you add HBO and you add all this. They’re spending on these products, and they’re spending their money on these services.

They’re just not buying the $107 bundle from the cable distributors.

They’re spending $100 on their entertainment via a package that they think is better for them, right?


Which I think we will ultimately evolve to, where everyone can have a choice and make their bundle in a way that is efficient for their economic position and what they can afford.

I think we lose sight of a couple things in this process. One is convenience. These services are incredibly convenient. They’re on your phone. They’re in your living room. They’re on your laptop, your computer, your tablet if you want that. They are where you are. They’re mobile, mobile meaning they go with you. If you’re going to a hotel, if you’re going to a game, if you’re going on a commute, whatever it is, they travel with you. So again, it adds that.

There’s a tremendous amount of content in them, quality content across the board, that you can select. You have choice.

Then you get to the user experience, which is, if you look at the history of television, there was radio, there was broadcast, there was cable, there was satellite, then telco. We’ve always defined this based on a distribution mechanism instead of defining it based on the content, which is where the true value is. Now we’ve gone to IP delivered. In all of those prior situations, nothing changed for the consumer. The experience was virtually the same.


I had the same package if I had Comcast or DirecTV. I had an EPG [Electronic Program Guide] that provided me, where the channel guide was.

Now, particularly with Hulu, you have the blending and the blurring of lines between live and on demand. You have an intuitive user interface that hopefully can get you from one place to another. You have a recommendation engine that can bring you products and bring you programming that you may like, you may not like.

The user experience in this process is another thing that is brand new. It has changed from the history of television being defined by the distribution mechanism. That’s why I also believe that over time we won’t define this as streaming. This will be part of the move to, you’ll define your TV experience based on the content, which is really what the experience is, versus the technology that delivers it to your home.

Yeah. As an aside, I like the fact that in your presentation yesterday you guys said, “We’re bringing back the TV grid.” When you launched the new version of this a couple of years ago, I remember sitting at CES in a suite and they showed me the service. I said, “Where’s the grid?” They said, “We don’t need grids, man. That’s an old paradigm. Old people like grids, but you don’t need them. You just get TV. It’s all coming to you.” I said, “All right,” but I could feel like a nervous scratch that I wanted the grid. You brought the grid back, so thank you.

You weren’t alone.


Look, we probably overestimated the willingness or underestimated the ability for people to jump from one side of the Grand Canyon to the other. We built a consumer experience that probably was where things may end up, or where we get to, but it wasn’t as intuitive as we probably should have built. On top of that, we didn’t give consumers a path to walk with us and get there. You aren’t alone in your desire to have a EPG.

While I’m offering you product notes …


I mostly use you to watch sports and then Top Chef. There was a two-month period where I just turned you on every week to watch Top Chef, and you guys never said, “Hey, Peter, welcome back. Here’s the next episode of Top Chef.” Instead you would say, I don’t know, “Here’s other stuff we have to watch.” Is that intentional, or is it that you want to show me other stuff and you figure I’ll get to Top Chef, or that’s just something you’re going to get to later down the line?

Certainly not intentional. We should be notifying you when a new episode of Top Chef is on. I’ll go back and take those notes to the group and I’ll find out.

Yeah, I was going to say, we can do another hour with my product concerns.

Happy to talk.


It’s always nice to talk to customers about what they want from the product standpoint. Every morning I get a ton of emails on suggestions as to what we can do.

I’ve said now a couple of times that you spent your life in TV. TV is generally a wholesale business, traditionally a wholesale business. You guys sell stuff to Comcast. Comcast sells it to me. Now you’re in a business where you’re selling me something directly, and I come to you and I complain about the grid. What is that change like for you, running a company that’s direct to consumer as opposed to a wholesaler?

It makes you focus very quickly on the end result. It forces you out of the focus on you. Look, everything we do at Hulu, as one of our core values, starts with the viewer, for us, the subscriber, how they use the product, what they do day in and day out really starts with how are we benefiting that consumer.

For me, coming in from a place where traditional, in the television world, where originally, at one point in time, you had ratings, and that’s what you looked at, then you had viewers. Now when social came into play, you had some direct interaction and feedback, which was always interesting, but still it was pretty much about a rating process. We know every day how many people use the service. We know if it’s up or down. Did they stay longer? Did they stay shorter? That really gives you the opportunity to focus in on it.

The other thing is, for me, coming in, and it took a little while to embrace, the entire company has that focus and you feel it. You feel when you walk into a meeting, you feel when you’re in a conversation that the conversation is not, the first thing that’s brought up is not Hulu. It’s like, “Okay, what are our subscribers doing? What are our customers doing? What does this month look like? What’s engagement look like?”

It’s something that is incredibly exciting for me to walk in every day and see the cultural impact of knowing you have customers versus putting something out to a distributor, who is then going to put it out to a household, and then you’re going to measure that based on what a third-party rating system says you did in a given night on an average minute, versus knowing, very quickly, if you put a show out, “Okay, these people, this group of people watched it. We know that something happened in episode three because that’s when people stopped watching it.” It gives you so much more input so that you can then hopefully make better decisions going forward.

You still have to deal with distributors, except now the distributors in some cases are your competitors. I can buy Hulu through Apple. Maybe I did. Apple is going to have some kind of video service out this fall. Can I buy Hulu through Amazon?


Yeah, and I think they sell a lot of it, Hulu probably. You go on down the list. I could buy it through Roku. Everyone has these channel setups where they’re going to sell your service and HBO, etc. How do you think about navigating that world where the people who are selling your stuff are also selling their own stuff and your competitors’ stuff?

Look though, the world’s filled full of the competitors in this process. The current situation, there’s still a device needed, whether that’s a Fire Stick or a Roku or an Apple box or some other version of that, so you have opportunities to package and sell to customers with those two things in a way that creates a relationship with Amazon and others that helps them sell their products, as well.

While we compete on a content basis with many of those companies, they are also our partners, and we drive their business, they help drive our business. That’s part of the process. Look, all of these are very, very big companies that operate in different parts of the world. You drive as much as you can through their businesses, and then you drive as much as you can on a direct basis as well.

Netflix has gone out and said, “You can still obviously watch us on Apple TV and Apple products, but we’re not going to sell through them.” Apple is basically trying to put together its own TV guide, which has a lot of benefits for Apple and potentially for consumers. Netflix has a lot of reasons to not want to be in that. It seems like you guys could be in that same boat, that you might say, “You know what? We’re better off not being part of this channel offering that Apple is going to provide.” It’s kind of confusing whether you are or aren’t. What’s your feeling about participating in whatever that product is going to be?

Well, Apple today, you can buy the SVOD service on Apple today. You can’t get the live service today on Apple.

Okay, hence my confusion.


I must have paid you directly.



Again, we’re the same as we were last month, this month with Apple from the standpoint of, you have an Apple TV, come on the service. You can buy the SVOD service, and we’re moving into being able to offer more services as well. They take their rev share. We get our piece of that. Product is the economics as well. We’re very happy with the relationship with Apple as a distribution partner for the service, as an economic partner for the service. They’ve been an excellent partner for us.

Again, it’s not just distribution, right? Because they’re trying to create this … They have a TV guide product that is kind of good. It will tell me, “Hey, there’s a new HBO, new episode of a John Oliver show up. You should watch it.” “You have Hulu. There’s a new episode of whatever. You should watch it.” On the one hand, that’s potentially really good for you. On the other hand, that gives Apple the ability to feature somebody else instead of you.

Yup. Look, it’s a competitive world out there.

That’s life.

It is. It is. That’s why we have to be great at the user experience. We have to be great at servicing customers. We have to be great at providing customers choice and control of their service and what they can do. On top of it, we have to have the best content.

I think the way we look at providing that content is, the best television ever made, whether that’s Seinfeld or more recent great shows, current season television from broadcast networks and others, other library content originals that have impact and matter, and a live service that allows you to drive news and sports. What we find in live is — again, the majority of the content that is watched inside live is news and sports.

Even the entertainment programming, short of a couple of channels that have a very passive relationship with the customer, when people inside of the live service watch entertainment, they mostly watch it on demand.

I don’t need to watch this thing at 9:00 on Sunday. Game of Thrones is the exception.

There’s nothing live in entertainment, other than a couple of shows, The Voice, American Idol, some of those competitions that actually is live, so we can create … You can still … Look, if you want something to air at 9:00 on a Sunday night because it’s big and you want people to watch it together on on demand, we can still drop that Sunday night at 9:00 and everybody can choose to watch it at 9:00 if they want.

So live is still a big deal for news and sports, but beyond that, the idea of someone tuning in at 8:00 or 10:00 because that’s when the show is on, we’re fully past that period, basically.

Yeah. Look, I think there are exceptions to the rule. The last few Sundays probably Game of Thrones is the exception to the rule. I don’t think that’s a new thing. I think over the last five, seven years, when you look at broadcast television, they moved from a very dominant live window of viewing to C3, C7, you know, 28 days. Most broadcast shows, I would say today probably have as much non-live viewing on Fox or ABC or CBS or NBC, for that matter, than they do live viewing that started at 8:00 on Tuesday night.

Okay. When is the the Vox-produced David Chang show going to run?

We haven’t set a date yet.

I should find out, right?

You should.

Figured I could ask somebody in this building.

Well, as soon as we set a date, you’ll be the first to know.

All right. Randy, this was great. Thank you for coming in.

Thank you for having me.

Recode and Vox have joined forces to uncover and explain how our digital world is changing — and changing us. Subscribe to Recode podcasts to hear Kara Swisher and Peter Kafka lead the tough conversations the technology industry needs today.

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