What was Hulu thinking?

Yesterday Boxee announced that it was removing content from Hulu from it's service. For those unfamiliar with Boxee, it is free media center software that provides connectivity to Hulu, YouTube, CNN, CBS, and downloaded content and plays it directly on your TV. Hulu, an online media portal run by NBC and Fox, was one of the biggest draws for Boxee because Boxee provides an interface for Hulu that makes it easier to use on a TV.

The integration of Boxee and Hulu provided Hulu with nearly 100,000 streams last week - major traffic - and lost of exposure to new audiences. So what was Hulu thinking, removing it's content from Boxee?

First, it wasn't "Hulu" that removed the content, but Hulu's partners (read: NBC and Fox). These networks have a great reason to want to remove the content from Boxee: They don't want you to watch their content on your TV through the internet. They want you to watch it over-the-air. Why? Because over-the-air ads sell for significantly higher rates than online ads do. So they lose money when you watch the show through Boxee and not on your TV.

But somewhere along the line they figured that many people either don't have TV, or don't want it, so NBC and Fox launched Hulu. Hulu is meant to be watched on your computer (according to NBC/Fox), not on your TV. Boxee breaks that barrier down, and makes the networks nervous. What if people start switching from TV to Boxee? What if they speed up the death of network television? These concerns (driven by monetary decision making) are what drove NBC/Fox off of Boxee.

The point? It's temporary. Networks can't keep pretending that the Internet isn't a major provider of content - it is the major provider of content. The sooner that someone pushes full-fledged on-demand TV over IP, the bigger piece of the pie they can control. It seemed that NBC and Fox were forward thinking, new-media savvy juggernauts, but clearly their hands are tied by the old way of thinking.