A little under two weeks ago in a comment on a GigaOM post about Boxee, I wrote:
I think [Boxee’s] current differentiation is based primarily on giving users the features and content they want in the form they want it, which is mostly a function of Boxee not being encumbered by the legacy business models of the incumbents.
Well, today those legacy business models came knocking on Boxee’s door in the form of Hulu pulling its content from Boxee at the request of its conventional media incumbent content partners. Though the very diplomatic (but still genuine, which is a hard line to walk) blog post from Hulu CEO Jason Kilar doesn’t say why, I agree entirely with TechCrunch’s assessment that the content partners weren’t so keen to see Boxee getting all this great press for doing an end-around the legacy value chain these guys are fighting tooth and nail to prop up. Boxee was a stand-out at CES in early January and I don’t think it’s any coincidence that Boxee first heard from Hulu on this matter just 2 weeks after the NY Times ran a very high-profile and positive article on how Boxee was so awesome for delivering major media content to the tv in the way consumers want (which also happens to be exactly what the major media companies have been fighting against). When you think about it, this timeline pretty much matches what it would take for the content companies to read the NY Times article, bitch about it to each other, decide to go to Hulu, get push-back from Hulu, and then steam-roll them.
Steve Raymond has a great post on why this is such a short-sighted move by the content providers, with which I totally agree. So, I won’t rehash it here. But, I will say that this issue is only the tip of the iceberg threatening Boxee. Though they have effectively found an un-endorsed end-around to the legacy living room value chain, this shows how dependent they still are on the goodwill (or at least ignorance) of the incumbents. They have poked the bear and it is now awake. The networks obviously don’t want to lose the high CPMs and concentrated audiences they get from broadcast tv, which can arguably be replaced by online ads at some point in the future. But, what can’t be replaced is the increasingly valuable fixed revenue stream from the carriage fees paid by cable and satellite operators (NBC and Fox, the primary content providers to Hulu, both own ~10 widely carried cable networks). A product like Boxee is a direct threat to cable and satellite operators because it eliminates their positions as programming gatekeepers and turns them into dumb data-delivery pipes. So, I wouldn’t be surprised if this move was driven more by the cable and satellite companies than the content providers.
In my original comment, I predicted if Boxee succeeded in pioneering this space they were likely to end up like TiVo. Now I think they’ll be lucky to get that far.