The Significance of The Colbert Report on Hulu

Big news in the content world: Viacom has made some of its shows available on Hulu.com, the joint venture between major TV networks to offer full-length TV shows online.

In particular for me, two of my favorite shows are both now available on Hulu, The Daily Show and The Colbert Report.

But this isn't a story about how a show I like is available elsewhere. Instead it's a tale of the internal dynamics of the business of online video delivery.

To frame this, I've been watching full episodes of these shows for a while on ComedyCentral.com. In fact, they've been online as long as pretty much any first-run TV show.

But watching them was always an exercise in frustration. The reason for this was the placement of ad breaks. Not only were there ads during the natural commercial breaks, but they'd often appear after every comedic bit rather than after every segment.

Making matters worse was the haphazard nature of the ad breaks. I can't tell you how many times the punchline of a joke gets cut off while watching on ComedyCentral.com.

Now, trying to squeeze more ads in make some sense, but it always felt awkward and forced. It just didn't make any sense why Comedy Central was sabotaging the online viewing experience of these shows.

Until I read an interesting tidbit somewhere a couple of weeks ago: Viacom had made the decision to cut everything up into short clips so as not to upset cable operators.

It's important to understand that the current cable TV system is setup so that your cable TV provider is paying a fee to carry channels like Comedy Central. Needless to say, when media companies make that same video available for free online it doesn't make the cable guys all that happy. In fact, some are starting to wonder why they're paying for content that's being given away elsewhere.

By cutting shows into short clips, the thought was it would help placate these concerns.

But something's changed--my guess is the financial success of Hulu.com--and now you can watch full-length episodes of The Daily Show and The Colbert Report on Hulu.com in their original form with their original ad breaks.

This is a big win for consumers, especially those like me who have foregone paying for cable when so much video's available online for free.

Where this all leaves us I'm not entirely sure. Content owners realize that if they don't get in the game online they're likely to be left behind. But by doing so they're calling into question their relationships with cable TV operators.

The final variable in all this to consider is the financial model of delivering content. On cable TV, content owners are getting paid to have their shows distributed. But online, content owners have to pay to deliver their show. Additionally, on TV they're able to run 6-8 minutes of ads for every half hour show whereas online at best it's 3-4 minutes, so less revenue.

A great piece to read about these conundrums was written by Mark Cuban a few weeks back.

The old model of media distribution is rapidly breaking down, and while I'm happy to report that at least in the battle over The Colbert Report that we, the viewers, have won, the future is entirely uncertain.