If you haven’t had your head in a box without internet for the last year and a half or so, you know about Hulu.  For those of you who haven’t ever been to Hulu.com (or seen the commercials on TV), Hulu is a lot like YouTube, but instead having lower-quality videos users upload themselves, Hulu hosts mainstream TV programs.  If you miss your favorite TV show, it usually is up on Hulu in a matter of hours (with a few exceptions) and available for a period of time (usually determined by Hulu’s contract with the network the program airs on).  Unlike regular TV, most programs can be seen with limited commercials.

Pretty much everyone can see how great this service is; after all even with DVRs and TiVos becoming more and more common, it is virtually impossible not to occasionally miss your favorite program.  And if you’re like me, sometimes it is just impossible not to miss a show you want to watch because another show is on at the same time.  But even with the large user base Hulu has started to amass, they purportedly are struggling to make a profit leading the companies that jointly run Hulu, NBCU, News Corp, and Disney, to announce the service is going to transition to a paid model sometime in 2010.  It is currently unclear whether this would be a pay-for-use model like iTunes or if it would be a subscription model, but either way it is my belief that charging for content will backfire and cause Hulu to do even worse in the long run.

ABC, NBC, and Fox (I don’t know about CBS, because I don’t watch anything on CBS) have provided their shows on their websites for maybe two years under the same sort of system as Hulu, but with the introduction of a centralized, single site where users can go to get all their favorite shows, Hulu has become the standard for online TV.  People have come to expect a free site where they can go to watch their TV shows, and with the largest user demographic for Hulu being people under the age of 30, a paid model just won’t work.  People will turn to other sites, or torrents to get their shows for free.  In other words, everybody loses.  Networks lose money because they don’t get any profit from the people who turn illegal ways of getting their content.  Hulu loses its share of the market.  And the consumer loses because they have to risk viruses and will have to settle for lower quality picture and sound.

On the other hand, it is obvious Hulu can’t continue to operate without generating a profit.  How can both the users and the businesses win?  The answer is simple.  Implement regular commercials into Hulu’s system.  Make them watch the same number of commercials they would have to if they tuned into the program on regular TV.  Television stations have already proven this works for decades.  Why wouldn’t it work on the Internet?

And because the Internet is interactive, there is a possibility for even more profit from advertising.  The reason why Google can provide so many services for free is because they use the information they have on their users to give them ads users are most likely to find compelling, thus increasing the usefulness of the ad.  Instead of charging money to use Hulu, they could just require everybody gets an account and fill out a survey on their likes and dislikes.  They could also target ads based on what types of shows a user watched.  Furthermore, they could charge more money for ads that cut across demographic audiences.

And sure, most users like the fact they don’t currently have to watch as many commercials when they watch on Hulu, very few watch online just because they don’t want to watch commercials.  To deal with this group of users, Hulu could offer a pay-for-premium access that allows them to skip the commercials.

There is still hope Hulu’s parent companies will choose to go this route to continue to provide free shows to users – it isn’t over until you are required to enter a credit card number to see your favorite show.  But mark my words, if Hulu switches to paid content, there will be a vacuum for free TV… and something will fill that vacuum, legal or not.