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How Hulu Works

Hulu and the Shift Toward Online TV

With or without its challenges and controversy, Hulu has helped lead the major shift from cable and broadcast TV to online television. Hulu's target audience is aged 18 to 49, and a 2007 Deloitte study indicated that nearly half the younger viewers in that range visit television Web sites regularly -- usually with a referral from a peer. Even though a significant portion of every age group studied embraced the value of the Internet, it's apparent that the shift toward Internet TV is a generational one -- and that the youth are leading the way [source: Deloitte]. At, Matt O'Hern dubbed this the "Hulu Effect," noting the influence Hulu has in this growing online television market [source: O'Hern].

In this strained economy, many early adopters have embraced Hulu and other online television and video sources enough to cancel cable television and turn in the digital video recorder (DVR) [source:]. Movie rental services like Netflix now offer online viewing in place of a DVD for some of its feature films, and most mobile phone services offer some form of streaming video service that you can use on the go. Rumors have also spread across the Internet that Hulu itself is developing an application for Apple's iPhone that will work on both 3G and Wi-Fi networks, and will improve the Hulu viewing experience for iPhone users [source: Frommer]. With these alternatives on the horizon, cable TV providers will have to start accommodating online viewers in order to remain competitive.

So, where does Hulu go from here? If the shift to online viewing continues unabated, Hulu could enjoy steady growth in the coming years without having to change its current business plan. However, if ISPs proceed with bandwidth capping, this growth could be limited, forcing Hulu to consider other revenue options like paid content or a subscription model. For now, Hulu is poised to continue its role as a leader in providing quality online video content.