Noise Speaker 1 So, let's talk about the future of TV, and specifically, an, an area of Hulu that I don't think people have a full appreciation for, and I'll say, Kenley, assumed spelling we haven't, you know, talked very publicly, about this, before; but I thought would be a good time to do so; which is, we fundamentally believe that advertising is going to play a very big role, in the future of television. Any scenario that talks about the future of television, that doesn't focus on advertising, I believe, is missing a critically important part of the story, and I want to explain why. If you take a look at how premium content owners make a return on their investment, the way that they make a return on their investment is, primarily through three different methods; they make revenue through subscription services; they make revenue through transaction services, whether you buy a DVD, whether you buy a movie ticket, whether you buy a, an episode of TV show, over the internet; and then, the third part is they buy, they get revenue, through advertising. It turns out that 41 cents of every dollar that is generated against premium content, is actually advertising. So, a little north or 30 percent is, is through subscription, and a little less than 30 percent is through transactions. So, the leading source of revenue, in terms of, if you invest billions of dollars, in creating content, the leading source of how you get your return on your investment, is actually through advertising. And so, I think that's something that, quite frankly, a lot of folks, who, who comment about this industry, who think about this industry, who talk about the future, I think they're missing the, the component that 41 cents of every dollar, that's generated against content, is through advertising. So, that's going play a very, very big role, in terms of the future of television. So, we believe in the relentless pursuit of better way, with regards to advertising, with regards to brain advertising, that's, that's clearly a huge focus, for our technology team, it's clearly a huge focus, for the entire organization. And, what I wanted to do is, take you through about a handful of examples, of how we're being relentless, about pursuing better ways, so that you don't have, you know, a gentleman without hair, being bombarded with Loreal commercials, with people, with a lot of hair. So, when it comes -- the first thing I wanted to share is, we have a strong held belief, which, I think, is not a surprise to everyone in this room, that when it comes to the amount of advertising, running against premium content, we just fundamentally believe that, everyone should lighten up, certainly Hulu should lighten up, and that's what we did, from day one; and I want to explain why we believe that's the case. If you go back and study the history of TV, Alfred Hitchcock Presents, which was in the 1950s, one of the top TV shows, at the time, golden era of television, it was 26 minutes long, had 4 minutes of advertising, that ran against it. A popular series today, The Office, is 22 minutes long, it has 8 minutes of advertising, against it. You can understand how we got here, which is the quarterly public shareholder pressure of, gosh, I've got to, I've got to, you know, generate more revenue, I've got to do this, I've got to do that, so you can understand how, how more and more ads were added, to content, over time, it's totally understandable; but I think where we are today, is not the ideal balance, in terms of making sure that it's a great experience, for consumers, that the advertising actually works really hard, for advertisers, and that content editors are making the highest possible return. I think the balance is, I think it's out of balance, quite frankly, and I think it's not surprising, we see the rise of the DVR, which in addition to time shifting, also has the benefit of actually skipping through ads. A lot of people I talk to, tend to go DVR, because the ad load is just so extremely large, in terms of linear TV. So, that's the first we did, we, we're more on the Alfred Hitchcock mode, in terms of the amount of advertising. Another thing that we've done is, actually let people choose what ads they want to watch, at a commercial break; so, instead of guessing if you're the Coca Cola Company, that everybody that watches 30 Rock, has a slight preference, for diet beverages, which isn't the case, there might be more than 50 percent that have that preference, but not everyone, why don't we just let people, who are watching 30 Rock, for example, on Hulu, choose, do they want to have a Coke ad, a Diet Coke ad, or a Sprite ad? Much better for the advertiser, much better for the consumer, and also you get a lot higher CPMs, which means the content owner makes more money. Another one, which is probably hard to see, from the back of the room, this is, you know, call it, call us the Master of The Obvious, which is, you know, a lot of advertising, for example, is used in, by automobile manufacturers; so, you see a lot of car ads, on TV. The, the, the best money spent, in terms of advertising, for manufacturers, is to talk to people that are in the market, for a car, in the next six months, that's when you're actually receptive to messages and thinking about what car to buy, and why, et cetera. So, what we've been doing, is talking to our 30 million users, each month, and just asking them simple questions. So, instead of, we give them the option to, either watch a 30 second commercial, or if they'd like, they can just answer a question, that will probably take about five seconds, and then they get back to their TV program; so, it's a good value trade, basically watch a commercial, that's fine, that's 30 seconds, or answer a questions, so they can actually help improve your advertising experience, and you'll probably get 25 seconds back, so that you can go back to the program sooner. And what we do in asking that questions is, a simple thing here, are you in the market, for a car, in the next six months, and when we ask that question, and being transparent with users, about why we're asking the question, then we can do a better job of showing car advertisements to people who are actually in the market for a car, and not doing so, for people who are not in the market, for a car. Again, better for consumers, better for advertisers, content owners make a lot more money, as well, in that, that situation. So, another thing that I hope some of you in this audience has been exposed to, which is this notion that, you know, let users make a decision to give more of their attention to an advertiser up front, and in return, let's say, have no commercials, in, in your sitcom, that you're about to watch on Hulu. And, the reason why we did this, is we were hearing from theatrical marketers, that the very best marketing that they could possibly do, is to let people watch the full two and half minute trailer, for the, the, the hot movie, that they've got coming up, whether it be Skyline, in this example, or Harry Potter, that, that two and a half minute, three minute trailer, really is the size canvas, that allows them to make an emotional connection, with the audience, it gets people engaged in the characters, it, basically, by the end of a really good trailer, you're saying to yourself, "That's the movie for me," if, if, if it is for you; and so, what we've done, is give people the opportunity to opt into this and say, you know what, I'm going to watch a full trailer, up front, and then I won't have any ad interruption on, on my episode of Family Guy, or, or Modern Family. So, this next one is something that we haven't talked about publicly, before, and I wanted to share with you, at least some stills, from it, which is, we all get presented television spots, for new TV series, which is, hey, you know, get ready for this new television series, called whatever, of a new episode, that you might not be aware of, and historically, in the last 60 years, they haven't been smart, they've been, basically just inserted by hand, against a, a popular program, and they're stitched together, and that's the way they work. What we did is, we actually asked ourselves, what if television promotional spots, were actually smart? What would that world like? So, here's what it looks like, on Hulu, which is, imagine you're Community, great series on NBC, you're watching the show, it goes to commercial break, we address you by name, and it says, "Damon, did you know that fans of Community are three times more likely to watch this show," and this is a show, from Britain, called Peep Show, really funny show, that our algorithm in the, you know, as we've studied the data, of the users on Hulu, there's a preponderance of people who watch Community, who also watch Peep Show. Probably, almost no one in this room knows Peep Show, but the, the, reality is that it's the kind of show, that people who like Community, would love, based on the data that we've actually scrubbed. So, what we do, is we put this in a very personalized sight, sound and motion message and we actually show scenes, from Peep Show, we've stitched together a great montage, we talk about, you know, what other people are saying, about Peep Show, in this case, the Guardian, from the U.K., and then at the end, we actually let people, and we always show this, by the way, at the end of a television series, so at the end of Community, and we let people to decide, either to bookmark it, for future viewing, or even just go and watch it, right then and there. Usually, on the internet, if you're getting close to one percent response rate, you're doing really, really well. This gets a ten percent response rate; so, one out of every ten people, that is presented with this, this spot, either bookmarks it, so they can watch it the next time they're at Hulu, or goes, directly to the series. So, you're talking about fundamentally reinventing the way that people launch, in this case, new TV programs, and certainly on Hulu.
Noise
==== Transcribed by Automatic Sync Technologies ====
