by Chuck Salter
WHEN JASON KILAR left Amazon in 2006, he was unsure of what to tackle next. So he rented office space in Fremont that became his own personal Fortress of Solitude to think big ideas. Over time, he developed ideas that would contribute to what became his “vision” at Hulu—of an elegant, clutter-free, easy-to-use video hub for all the TV and movies anyone could ever want, available whenever and wherever they wished. This vision is what drives him still; it’s the one thing he talks about with a sincerity and genuineness that is not guided by MBA bullet points he picked up at Harvard Business School or by overcooked PR savvy. After Kilar got hired to run Hulu in 2007, he made it L.A.’s incubator for the future of video, a place where crazy ideas were not only scrawled on whiteboards but implemented.
He needed every bold idea he could get. Television studios detested the nascent world of online video. They saw YouTube as a haven for piracy. And while they had the sense that technology might force them to put content online, they shuddered at the thought of their high-production shows sitting next to short, clumsy low-tech vids of “cats on skateboards,” as J.P. Colaco, Hulu’s head of advertising, jokes about that era. A-list advertisers wanted nothing to do with such an environment, and the thought that anyone would ever pay to watch web video was laughable. Before Hulu even had a name, observers dubbed it Clown Co. The idea that two old-school media rivals, Fox and NBC, could collaborate on a startup and make sense of all this seemed insane.
But the observers hadn’t reckoned on Kilar. His attention to detail made Hulu a success from the get-go. He made Hulu’s video player larger than usual. He led the move to put content in HD. He let viewers watch fewer ads than they would on TV, and he let them swap out spots to watch others they preferred. “We wanted to draw an emotional reaction,” says current CTO Rich Tom. It was all so risky, and it turned out to be all so smart.
“When we started, we had nine brave-soul advertisers who were willing to test it,” Colaco says one day over lunch at Stefan’s at L.A. Farm, a sleek restaurant within walking distance of Hulu’s offices. (“Stefan” is Stefan Richter, the cocky Finnish-born finalist from season five of Top Chef—clips of which are available on Hulu.)
Now Hulu has served more than 1,000 advertisers, including top brands such as Geico, Johnson & Johnson, and Toyota. It delivers a very attractive demo of young, tech-savvy viewers with an average annual income of $75,000. (On Hulu Plus, it’s $100,000.) And it commands a premium price for those spots, typically $30 to $35 per thousand views but even up to $50—close to 10 times what YouTube can charge.
“We’ve introduced a number of practices that have since become industry standards,” Kilar says. “The Hulu team takes pride in exploring uncharted territory. It is who we are.”
FEW OF THOSE BREAKTHROUGHS came without a fight. At his first meeting with senior Fox executives in July 2007, Kilar got an early taste of what he was up against. Instead of Kilar and his team getting an opportunity to talk about what Hulu might be, the meeting began with the network executives—a species famous for neither humility nor technological foresight—pontificating about the Internet “in animated ways,” Kilar says. “After about 20 minutes, the head of the network waved his team to quiet down for 15 seconds so that at least I could introduce myself.”
From the vantage point of the executives, it is Kilar who is the demanding and overbearing partner. Upon realizing that NBC and Fox were not going to allot him enough new episodes to create a meaningful warehouse of content, Kilar made a wish list of back episodes. When the networks told him that many of those programs either hadn’t been digitized or had digital rights that were still frozen, Kilar continued to press. “There were some very uncomfortable phone calls,” says one former Fox executive. “There was a lot of ‘Jason, that’s just not reasonable.’ ”
When thwarted, Kilar didn’t think twice about vaulting up the ladder to make his case to the two men who hired him—Peter Chernin at News Corp. and Jeff Zucker at NBCUniversal. He usually got more, if not all, of what he’d asked for. Kilar has a talent for managing up. At Amazon, he was “kind of special,” according to Jason Child, a former Kilar peer at the online superstore who is now Groupon’s CFO. “Jeff Bezos loved him. He was one of the youngest people to be promoted to senior vice president.”
Chernin and Zucker were protective godfathers. “I’m not sure everybody who worked at Fox necessarily agreed with me or loved what I was saying,” Chernin remembers. “But ultimately, I was in a position to make the final decision. I just said, ‘We’re doing it.’ ” When ad sales executives at Fox and NBC complained that suddenly they were competing with Hulu for advertisers on fox.com and nbc.com, Chernin and Zucker batted them down. Ditto when competing network executives moaned that Hulu was yet another drain on TV ratings.
Not surprisingly, Kilar’s relationship with Chernin and Zucker bred resentment. “Jason knew how to play Peter and Jeff off of each other like nobody’s business,” says a former NBCUniversal executive. “It’s like he was going to his parents and saying, ‘I got this from my other dad. You’ve got to give me that.’ ” A Fox source denies this, saying Chernin was always “very balanced” about the interests of Hulu and those of Fox.
Kilar was the “golden-haired boy getting all our content for free,” says one former NBCUniversal executive, referring to the fact that Hulu did not pay NBC or Fox licensing fees for its shows. Instead, it gave them a share of ad revenue with no minimum guarantees.
Kilar further rankled the industry when he rejected older shows from the studio’s libraries, because they did not meet his quality standards. In doing so, he ultimately forced the networks and producers to improve the way they encoded content. “Sometimes it takes a fresh point of view to realize these things,” he says. But the us-against-them dynamic played into something that really grated on the network guys. “They were the cool, new thing and the internal businesses were seen as stodgy and traditional,” says one source. So when the techie violated some of Hollywood’s myriad unwritten rules, they let him have it. For example, when Kilar reached out directly to showrunners like Joss Whedon (Buffy the Vampire Slayer) and Seth MacFarlane (Family Guy), network executives let him know that they didn’t want him treading on their turf. But Kilar, as he so often did, wound up with the cool stuff. Whedon and John Cassaday released their graphic novel, Astonishing X-Men, as a “motion comic” on Hulu. MacFarlane created and starred in an ad for the service.
Kilar admits that “anytime you move away from the traditional norm in the media industry, there’s going to be ruffled feathers, and I know that was the case in the summer of 2007.” But he insists that he “spent a great deal of time listening to his new colleagues. “We would go visit everybody we could possibly meet, just to make sure people understood why we thought this was good for them as networks and as content creators,” he says. Zucker, a renowned corporate politician, puts it this way: “I always thought Jason was very even-keeled about the fact that he had to deal with three media companies and one private-equity firm. I think he learned a lot of diplomacy in the process.”
And he was successful. A clever Super Bowl ad in February 2009 that featured 30 Rock’s Alec Baldwin as an alien who reveals that Hulu is actually a plot to turn humans’ brains into mush sent Hulu’s traffic soaring 42%. A couple of months later, Hulu added Disney as a stakeholder. Kilar lured hundreds of content partners and grew Hulu’s library to 870 different TV shows and close to 500 movies. By the fall of 2009, Hulu had become the second-most-popular video hub online and the only one with a clear business model. Clown Co.? Not so much.
HULU’S SWIFT RISE MINTED Kilar as a superstar. His all-American looks and aw-shucks charm only cemented his status as a mogul on the make. He was not just a tech guy but a tech-media guy—a rare and very valuable commodity, then and now. He may have hailed from Amazon, but Walt Disney was his inspiration.
“I tried to do everything I could to study Walt Disney,” Kilar says. “I would read every book I could on the company, and then
I found out more about him as a person, as an entrepreneur, and it was just fascinating to me that this guy was able to live a great life with his family but also do these amazing things at work.”
When he was 9, Kilar’s dream came true. He and his family—he has five siblings—hopped in a “12-passenger cargo van” and drove from Pittsburgh to Orlando for a Disney World summer vacation. His memory of the trip is not of cool rides like Space Mountain, or what it felt like to be hugged by a larger-than-life Pluto, but, he says, of “the forced perspective of the architecture, how it all naturally led to Cinderella’s Castle.” In college at the University of North Carolina at Chapel Hill, according to his roommate Akbar Sharfi, Kilar threw himself most intensely into lining up an internship—and then a job—at Disney. In lieu of a cover letter, he created a comic strip starring himself.
This kind of deep passion makes Kilar a “product guy,” a CEO who gets his hands dirty. It’s an uncommon quality that he shares with people like Steve Jobs, Jack Dorsey, and Marissa Mayer, the executive who did become Yahoo’s CEO. But Kilar’s microfocus is both his greatest strength and weakness. According to one Hulu source, “Steve Jobs could obsess about 200 of 400 details, and they’d be the exact right 200. Jason’s more about two, and sometimes they are arbitrary. Like fonts. There are bigger issues to worry about.”
When I ask Kilar about his granular focus, he grins, sensing an opportunity for a show. “Hey! Makiko!” he barks into one of the dark offices in the design area.
A petite Asian woman pops out, her eyes wide as saucers. “I have a question for you,” Kilar says. “She asked”—he jabs his finger toward me—“if I spend any time on design and product at Hulu. You know, product details.”
Makiko’s face remains frozen. She seems to be considering whether she’s about to get Punk’d. Then a big smile breaks out and she nods her head frantically up and down. “Oh, yeah! Yes! Yes! He’s different from any other. He sees a change I’ve made and gets so excited. He’s the first one to say, ‘That’s cool!’ ” Kilar beams. The grown-up Boy Scout just earned a merit badge.
At moments like this, Kilar truly lives up to his persona. As any Kilarite is more than happy to broadcast, he is the too-good-to-be-true boy next door, the kid from Pittsburgh who made it big out West, the family man who makes a point of going home to tuck his four kids into bed every night, and who wakes up at 5 a.m. to go running. He’s so squeaky clean, he doesn’t even drink coffee! “He basically has no vices,” says Child.
There are no tales of Kilar delivering the kind of humiliating brow-beatings that make other CEOs infamous. “Jason is always in complete control of his emotions,” says another former colleague. At Amazon, “Jeff [Bezos] would say things like, ‘Okay, I just read this document, and it’s pretty clear we’re meeting with the B team. Is there an A team around here we can talk to?’ That’s not Jason’s style. Jason’s very direct, but he has a gift in that he can tell you that you suck, but he won’t say it as crudely as ‘You suck.’ He’s really got textbook management down.”
Not surprisingly, Hulu employees truly do seem like happy campers, insulated from corporate warfare by their boss. The offices are stocked with every startup cliche in the book. Foosball table? Check. Beer tap? Check. This is a place where an Experience Team is dedicated to celebrating employees with Mylar balloons, cakes, and Hulu-branded onesies. As Laura Goldman, a member of the team, explains, “I do birthdays, babies, and anniversaries!”
To Hulu’s media company partners, this approximation of startup life is an eye-rolling affront that has no place in Hollywood. “They had computers set up on cardboard boxes!” scoffs one source. And Kilar wasn’t seen as a visionary but as a noodge with endless, perfectionist demands. “Things would escalate over small [stuff], like the placement of a logo on publicity materials,” says one. “It was like, There he goes again.”
JUST ABOUT EVERY PERSON I spoke with for this article cites one day as the moment when the Hulu rocket ship changed course: June 30, 2009, when Chernin left News Corp. after failing to reach a contract agreement with Rupert Murdoch. “It was a seminal moment when Peter left,” says one. “Not only was he a champion of Jason, he was a champion of the concept and the idea that Hulu could both have stand-alone value and help drive value for the content over time.” Kilar acts upbeat when I bring up Chernin leaving. Even this, apparently, is an opportunity to make lemonade. “It was a big moment in our history,” he acknowledges, “but we’ve gotten past it and our growth has accelerated since that time.”
It’s hard to find anyone else with that rosy view. One former Hulu board member describes the first post-Chernin board meeting as nothing short of a disaster. The gathering took place at ABC’s headquarters in Manhattan, since it was also the first meeting since Disney had signed on. In lieu of the soft-spoken Chernin was Chase Carey, News Corp.’s new president and COO. A burly ex-rugby player (on the Harvard Business School team) with a handlebar mustache, Carey dominated the conversation. According to two sources, one Carey lieutenant, Jonathan Miller, News Corp.’s then-chief digital officer, leaned back in his chair and appeared to snooze. Disney chairman and CEO Bob Iger, who has generally been favorably inclined toward Kilar and Hulu, seemed visibly frustrated as the conversation grew more prickly. And Zucker’s influence was on the wane due to the upcoming acquisition of NBCUniversal by Comcast. (As part of the deal, the FCC ordered Comcast to give up any management say in Hulu to avoid a conflict of interest.)
“We were not in Kansas anymore,” the former board member recalls. “It was a whole new [Fox] team, and it was not clear that they had any interest in supporting Hulu. It was more about protecting their own core businesses.”
Carey’s main point that day was that Hulu could no longer exist solely as an ad-supported business. It needed a dual-revenue stream, just like a cable or satellite TV network, a model Carey knew well from his six years as CEO of DirecTV. Cable companies like Comcast were paying content providers billions of dollars to retransmit TV shows, a shift that had occurred since Hulu was formed. Why, the cable companies wanted to know, should they pay so much if the shows were available on Hulu for free?
“Chase Carey was not supportive” of Hulu, says yet another former Hulu board member. “He put up a lot of roadblocks to progress.” Soon after Carey’s arrival, Kilar hammered out plans for a fee-based subscription service that would offer more content than was on regular, or “free,” Hulu, and be available on more devices. Older episodes of shows would only be streamed on the pay service, called Hulu Plus.
Next, tensions flared over what the pricing of Hulu Plus should be, though Kilar denies that he threatened to quit over the issue, as was reported by The Wall Street Journal. “It’s fair to say that there were disagreements about whether to go higher priced, in the teens, or at $10 or lower,” he says. Kilar believed that Plus should be cheaper than Netflix’s streaming service ($7.99 a month), but the media companies felt that such a measly price tag devalued their content. In the end, a compromise was reached at $7.99, but the battle gave Kilar a sense of what life would be like without his corporate benefactors.
IN AUGUST 2010, STEVE LEVITAN, the showrunner of the hit ABC sitcom Modern Family, let loose with an angry tweet. “Some estimate Hulu IPO could bring in $2Bil,” he wrote. “What will the content providers get? Zero. What is Hulu without content? An empty jukebox.”
Rumors had heated up that Hulu was headed for the public markets. The scenario was seen as a way to (a) turn a nice profit for Hulu’s owners (the site was indeed valued at $2 billion) and (b) raise capital so that Kilar could go license and create more content. A public offering was also seen as a way to end the political infighting and provide a happy ending to a narrative that was getting more gnarly by the day.
To Levitan, though, the news was outrageous. Hulu cannibalized the TV audience for shows like Modern Family, he felt, and neither he nor the networks were being adequately compensated. Levitan even asked ABC executives to
remove Modern Family from the Internet.
But if Kilar was frustrated by Levitan’s outburst (the two men later reconciled over breakfast), he was more upset—disappointed is the word he uses—when plans for the IPO fell through that December. After months of discussions with investment banks, the media companies (News Corp., in particular, according to several sources) were uncomfortable signing long-term licensing agreements for their content. Before Hulu tabled the IPO, in fact, both ABC and NBC made deals with Netflix, giving Hulu’s rival access to Lost, Saturday Night Live, and much more.
The IPO reversal was the first public sign that things might be in disarray. The second came a couple of months later, in February 2011, when Kilar took to Hulu’s blog to write a 2,000-word state of the union titled “Stewart, Colbert, and Hulu’s Thoughts on the Future of TV.”
The post began by explaining how The Daily Show and The Colbert Report were now back on Hulu after a nearly yearlong hiatus that had resulted from a contract dispute with Viacom (which has no equity stake in Hulu). But Kilar was burying the lede. The essence of the treatise was to summarize what he saw happening in the new media space in Hollywood, including some harsh observations about his partners. Included in the post were pronouncements such as “Traditional TV has too many ads” and “History has shown that incumbents tend to fight trends that challenge established ways and, in the process, lose focus on what matters most: customers.”
Never mind that these are, well, truisms. Hollywood took the public airing as a giant middle finger to Hulu’s owners. And those owners were, predictably, furious. “The response was terrible. Terrible, terrible, terrible,” says one former Hulu board member. “Everyone thought, This guy’s a wild card.” Both inside Hulu and in the media gossip blogs, speculation sparked that Kilar was begging to be fired.
When I ask Kilar if he in any way regrets writing the missive, he insists his intent was not to offend. “Of course, in hitting ‘publish,’ I anticipated that there was going to be a lot of talk about it,” he says. “But that blog post holds up really well. When you read it, it’s very obvious that it was a document that had been thought about for a long period of time. Nobody truly appreciated where we saw this world going, and what we were hearing from customers.”