Hulu's big problem: No loyalty

As the Daily Show and Colbert Report leave Hulu, they reveal the video streaming site's greatest weakness.

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    There they go, walking out on Hulu. The Daily Show and The Colbert Report will leave the streaming video site next week.
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Next week, The Daily Show and The Colbert Report, two of the most watched shows on Hulu, will be pulled from the website's video library.

Fans have until Tuesday, March 9, to watch these and other Comedy Central shows before they disappear from Hulu. Reruns will still exist online, but only through the cable network's official sites, TheDailyShow.com and ColbertNation.com.

This departure will probably cause only a small dip in traffic. Hulu's audience has grown steadily for some time now, with 1 billion video views a month – second only to YouTube.

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But the Comedy Central announcement highlights an enduring problem for Hulu: loyalty.

The only reason Hulu has come this far is because NBC, Fox, and ABC joined forces to create the site and test the online waters. In a way, Hulu is guaranteed content from those three networks. Expanding its catalog into movies and cable shows, on the other hand, is an uphill battle.

Building a new business out of an old industry is tough work. Hulu promised viewers TV shows anytime, anywhere. What it found was onion-like layers of entrenched companies that liked the old system just fine. Offering shows anytime might take away advertising money from the original broadcasts. Offering them anywhere – and for free, no less – might push cable customers to cancel their subscriptions.

Even companies that "get" online video, such as Comedy Central, don't need Hulu.

"Rumor has it that Viacom wanted significantly more money to host the two shows, possibly even including payment up front (which would be a first for Hulu)," writes Fast Company. "One other possibility: Hulu is owned in part by ABC, NBC, and Fox--but not Viacom, which may mean that Viacom feels less obligation to see the service succeed. In any case, Hulu was unable to match whatever demand Viacom presented, and Viacom opted to just yank its content."

For further evidence of Hulu's position of weakness, check out the company's overly cordial (almost pleading) press release about the Comedy Central withdrawal.

"When a show is about to cycle out, we try our hardest to ensure that users who have subscribed to the show or have episodes of the show in their queue are notified in plenty of time so that they can catch up before the series sunsets," says Hulu exec Andy Forssell. "But typically we don’t recognize these expirations in any larger way than that, as it’s a fairly regular occurrence. Today, though, I want to recognize a couple of our favorite shows that are leaving the service for now, shows that we love so much that we simply can’t let them go without a more public and fond farewell."

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