>> rose: welcome to the broadcast to want. the health care debate continues tonight in washington, we talk to a key player, senator kent conrad, democrat of north dakota. >> i think the president is going to succeed, and his success will be our country's success, because his failure would be a fail ruhr for the nation. look, we are headed for the cliff, medicare is going to go broke in eight years. again, we are in a circumstance in which we are already spending twice adds much per person as any other country in the world and we're headed for a circumstance in which one of every three dollars in this economy goes to health care. that cannot be allowed to happen. and before that would happen, here's what would occur. we would have not just 45 million people uninsured, we'd have 100 million uninsured.

our businesses would become even less competitive. our trade deficit would skyrocket because our businesses simply could not complete effect ily in the world economy. and more than that, the federal government could not finance itself because it couldn't borrow enough money to float the boat. >> rose: and we continue with jason killor. >> i'm a big believer media is an impulse business. you don't need "30 rock" to live another day. it's not like food and clothing and shelter. i love "30 rock" and it's discretionary. the fact that it's an impulse business means that to me if you can make it easier to consume, people will consume more of it. so the ah-ha moment for the consumers was they could consume "30 rock" when they wanted. when the kids went to sleep. or in the morning when they went to break. and that's a big part of the hulu value proposition.

>> rose: health care and hulu next. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: the health care debate in washington has entered a critical phase. recent polls show the that public support for the democrats' reform plan have

declined. last week, the house energy and commerce committee voted along party lines to pass a reform bill. in the senate, a bipartisan group of senators are negotiating a separate bill that would replace the public option with nonprofit cooperatives. but as congress approaches august recess, many questions still remain. joining me in washington, senator kent conrad of north dakota. he's a member of the senate finance committee and the senate budget committee. i am pleased to have him back on this program. tell us, senator, thank you for coming and give us a sense of where you think this is headed and what the final version is going to look like. >> well, i suspect that in our group, six members of the finance committee-- three democrats, three remembers-- we're headed in the direction of a plan that would cover 95% of the american people. that would be fully paid for and that would bend the cost curve in the right way. that is, it would prevent the

explosion of health care costs that are continuing that threaten american families, our businesses and even the government itself. >> rose: will there be a public option? >> well, in our alternative, we have an agreement... nothing is agreed to until everything is agreed to and everything has not yet been agreed to so things could change. but i'd say the greater likely shood that some sort of public interest cooperative would will likely be the choice. and that is an entity that would provide competition for the for-profit insurance industry but not be government run and government controlled, it would be controlled and run by its membership. >> rose: and the membership would be... who would be in the membership? >> people who decide to buy into these plans. you know, that's the way a cooperative works. cooperatives are rally very

broadly used across the country. i sometimes read that cooperatives can't be big entities and yet land lakes is a cooperative, it's a $90 entity. i read that co-ops are only in the midwest. there are co-ops in every state in this nation. 47 states have rural electric cooperatives. ace hardware is a cooperative. operates all over the country. true value hardware is a cooperative. the associated press is a cooperative and, of course,n health care out in washington state they have a health care cooperative that's got 600,000 people in it competing very successfully. i think that given the reality that we confront in the senate, that reality is simply this: there are not the votes for health care reform if a pure public option is part of it. that's just the hard reality. every republican save one is against it.ç and there are a number of

democrats who are as well and so if you do the math it's very clear there simply is not support for pure public option. i think there is support for this public interest option called a kooptd plan. >> rose: where does the president stand on cooperatives? >> well, i understand the other day he indicated that it could be an acceptable public interest option to him. i can't speak for him, i don't know if he was misquoted, but i've heard that he's said that in an interview. >> rose: will he run in trouble with some of the people who were passionate in their support of him both in the primary and clearly in the general election? >> well, again, i can't speak for him. but let me just say i've certainly run into resistance to some of my close friends who've said "kent, what is wrong with you? why are you proposing something other than public option?" look.... >> rose: and the answer... go ahead, i'm sorry, i don't mean

to interrupt. >> i was given this assignment by the g-11 group, that's the chairman and ranking members of the key committees dealing with health care when it became clear there aren't the votes in the united states senate for public option. so they were looking for some alternative that would capture some of the strengths of public option and not the outright opposition of all republicans. so that's how i got in this position and, look, the cooperative model has been successful across many business lines for a very long period of time in this country. so it would provide a nonprofit competitor to the for-profit insurance companies that, in many states, simply face no competition and half the states in this country, charlie, there is no effective competition. >> rose: howard dean said "it's a shame, really, because democrats are going to end up being responsible for killing this bill. if we stick together like the republicans are, we can get this

passed. but unfortunately, that doesn't seem to be the case. this compromise does nothing except it will reform insurance. that's a good thing to do, but they ought to strip the money out of it because we've reformed insurance like this in vermont 15 years ago. it's a fine thing to do but it doesn't insure more people. the senate finance committee is really in trouble." >> well, i just disagree with that. look, i have great respect for howard dean, count him as a friend, but the fact is our proposal covers 95% of the people in this country. remember, the co-op proposal is just one piece of a much larger health care reform bill. and the coverage expansion that is in this bill is very significant. 95% of the people in this country would get covered under this legislation and that's separate and apart from the cooperative feature ofofthe bil. number two, congressional budget office says in their preliminary

analysis of our plan that it is paid for and it does bend the cost curve in the right way. and realize that is absolutely an imperative, because we're spending twice as much per person on health care as any other country in the world. one in every six dollars in this economy. and we're headed for a circumstance in which we're going to spend one in every three dollars in this economy on health care if we stay on the current course. that is utterly unsustainable. there's no stability in a plan that would take one in every three dollars in this economy for health care. >> rose: back to cooperatives, though, which you... many people seem to see as the way to get beyond the public option if, in fact, they're not willinging to do what howard done says. jay rockefeller. "i would be darned if i would be allowed to move forward to the extent i could move forward with something that sounds user friendly. what to worry about is are

cooperating going to be effective taking on these eye dant i can insurance companies? from everything i know from people who represent them the answer is a flat no." >> well, let me just say that we've gone to the best experts in the country, the best actuaries, the best insurance industry experts, people who are not in the insurance industry but are experts about it. and here's what they have said. they have said that the plan that we have on the table would very quickly get 12 million members, it would be the third biggest insurer in the country and would provide very meaningful competition to the for-profit insurance companies. remember, what jay is talking about is the status quo. he's talking about the current insurance market unreformed. in other parts of this legislation, we are going to dramatically reform the insurance market. they're not going to be able to deny based on pre-existing conditions anymore. they're not going to be able to engage in a lot of the pricing

games that they use now to extract profits from consumers. and so this is going to be a very different market. at least that's what the actuaries tell us. and as a result, when you couple reform with 40 million new entrants with a co-op model that has been so successful across so many different business lines in this country over 90 years, they say you're going to have a very effective competitor. >> rose: i don't know how to ask this question but here it is. all other things being equal, would you prefer if both the political viability of either way was the same, would you be for cooperatives or the public option? >> you know,sy really believe the cooperative approach is a superior one for the reasons i've given. i think it will provide very strong competition to the for-profit insurance market. i also believe that it is

politically viable, that it can get the votes. i also believe that this is a model that has worked very well for many years in this country and because its membership-run, membership-controlled, has a special way of connecting with the people it serves. >> rose: the idea of budget neutrality. soso argue the only way to achieve that is a tax on health care benefits. you say? >> no. that's really not the case. you can achieve budget neutrality over the ten years with other revenue types. what is very hard to do is beyond the ten years bending the cost curve in health care the right way without taking on some of the massive tax subsidy there is for health care in this economy. so, for example, the income tax subsidy to health care over the next ten years is $2.4 trillion.

and virtually every economist that has come before us has said "this is something you simply must address if you're going to bend the cost curve for health care in the right way. if you're going to prevent these burgeoning, spiraling costs that threaten coverage for everyone." so i think we've got to pay attention to that advice. >> rose: some people also say that if you're going to deal with the deficits, you have to reform farm subsidies. >> yes. and the last farm bill we passed had more reform in it than any farm bill in the history of the united states congress. >> rose: but was it enough? >> excuse me? >> rose: was it enough? >> it's a very good start. clearly we're going to have to do more because we look across the country, we understand we're headed for the cliff as a nation but let's be very clear: agriculture is not the problem. the last farm bill was fully

paid for, did not add a dime to the deficit. so if everybody was as responsible as we were and that was done in part at my insistence as chairman of the budget committee, i insisted the last farm bill be paid for and it was. if every other part of the budget was as responsible as we've been, we wouldn't have a problem. >> rose: some republicans argue that it has the possibilities of being a waterloo for the president. >> i don't think it is going to be a waterloo for the president. i think the president is going to succeed. and his success will be our country's success because his failure would be a failure for the nation. look, we are headed for the cliff. medicare is going to go broke in eight years. again, we are in a circumstance in which we are already spending twice as much per person as any other country in the world and we're headed for a circumstance in which one of every three

dollars in this economy goes to health care. that cannot be allowed to happen. and before that would happen, here's what would occur. we would have not just 45 million people uninsured, we'd have 100 million uninsured. our businesses would become even less competitive. our trade deficit would skyrocket because our businesses simply could not compete effectively in the world economy. and more than that, the federal government could not finance itself because it couldn't borrow enough money to float the boat. so we've got to get real as a country. we're on a course that is utterly unsustainable. >> rose: you are a member of what they call the gang of six. i think it was "the economist" magazine who said that the finance committee and the gang of six is the last best hope for sensible reform this year. do you think that's accurate? >> well, i... (laughs)

charlie, i'd hesitate to say a group i'm part of is the last and only hope. no, i don't really believe that. i do think that we offer a very serious alternative here and, you know, some of our colleagues say, gee, i'm not in the room, i'm upset by that. and i understand that frustration. but we're not the deciders. this group of six-- three democrats and three republicans, all members of the finance committee, two of them are prominent members of the health committee as well, the health committee-- we see the obligation that we have to make a proposal to our colleagues. our colleagues will be the deciders. our colleagues will be the one that offer amendments and vote and ultimately decide what happens. >> rose: what will happen before recess? >> what will happen before recess in the senate is that we will not have a markup in the

finance committee because we're not ready. and more important than any artificial deadline is getting this right. we met for hours again today. we'll be meeting everyday before the break. we will be meeting during the break. we have a full agenda of issues yet to be decided. i can report that the initial indications from the congressional budget office are that we're going in the right direction, that we have a proposal that can be fully paid for and will bend the cost curve in the right way and that will also cover 95% of the american people. that's a pretty good beginning. >> rose: and how would you measure what some are calling that there's been a falloff in public enthusiasm for the president's proposal, which is not really a proposal because he's waiting, i think, for what the senate will do? >> yeah, i think that's very unfair to the president. the president has given congress

the leeway to come up with proposals and, you know, some of the proposals weren't paid for and the people read about that and said "wait a minute, that's not what we had in mind." other proposals not only were not paid for but bend the cost curve in the wrong way. i solicited that testimony in a... an appearance before the senate budget committee that i chair by the head of the congressional budget office. and, again, the american people understand that we're headed in a direction that simply is unsustainable. so bending the cost curve in the wrong way is really not an option here. >> rose: what do you think about the bipartisanship argument? >> here's the hard reality. the democrats have 60 votes in the united states senate. that's true. senator kennedy and senator byrd have been absent due to illness for an expended period of time. and we all understand that and we respect them deeply and hope

for their quick return. but we will be in a circumstance when we start to vote in which there will be many dozens and dozens and dozens of votes. so i don't think you can count on both of them being there for that entire proceeding. so that takes you to 58 votes. a number of democrats have publicly said they would not support a reform proposal if it had public option included. that takes you down another three votes. now you're at 55 votes. you need 60 votes to advance a proposal in the united states senate. that tells me you've got to have republican support if you want to be successful. if you just want to take your position and say "it's our way or the highway," you can go in a different way. of course, another possibility is the use of reconciliation. >> rose: right. >> that avoids a filibuster. but there are major problems with reconciliation. first of them being

reconciliation requires the legislation to be paid for over five years and every year thereafter. under the budget resolution, health care reform could be paid for over ten years. that is a very, very big difference. and for those who say they want universal coverage, they better check very, very carefully. what will happen under reconciliation to their goal of covering the vast majority of americans? second, under reconciliation, you're subject to what's called the byrd rule. the robert c. byrd rule. the robert c. byrd rule was designed to prevent reconciliation from being used to write major substantive legislation because reconciliation was only intended for deficit reduction in which you change the spending numbers and the revenue numbers but not write substabive the policy. and so he put specific rules in place to prevent writing

substantive legislation. and so under the byrd rule, any provision that does not score for budget purposes is subject to strike. anything for which the score is only incidental to the policy change is subject to automatic strike. what does that all mean? parliamentarianists said if you try to write health care reform legislation and reconciliation, you'll be left with swiss cheese for legislation. so those who say blithely "we'll just go for reconciliation," i don't think they've done their home work about what that really means. >> rose: senator kent conrad of north dakota, a democrat who serves on the finance committee, the budget committee and is a member of the gang of six trying to find an acceptable compromise for health care reform. back in a moment. stay with us.

>> rose: jason kilar is here, he's the c.e.o. of hulu, an online video service getting increasing traffic and increasing attentionment. they offer free television shows movies and clips. kilar is a former amazon executive. he was brought to hulu by peter cher unanimous formerly of newscorp and jeff zucker of nibs universal. here is what they said on this program about hulu at earlier times. >> so the piracy opportunity, what i thought about was ultimately the more time i spent on it is, well, i think that there are things... legal things and enforcement things, et cetera, et cetera, they are not the meaningful way to fight piracy. the meaningful way to fight piracy is you need to give consumers legitimate opportunities to get what they want. and then i had also been thinking about the pay television business and the fact that hbo had done a great job of aggravating everybody's content. i think at the same time, jeff zucker, head of nbc universal,

had been thinking about the same sorts of things. >> the biggest challenge we face on a daily basis is just how fragmented the media world is and how we're going to make this transition from the world that you and i have grown up in, this analog world where really we programmeded to the viewer and we told the viewer when the movie would come out and all of those things to this new digital world where, frankly, everything's available wherever the viewer wants it, however they want it and navigating that new world is really the big challenge of anybody in my position. >> rose: abc has also announcedd that it would join and become a partner of hulu. many of their programs include fare from the three networks "family guy" "30 rock." also programs like "the daily show with jon stewart." they have also talked to this program about being included in hulu. i'm pleased to welcome jason kilar to this table for the first time. whose brain child was this? >> the first credit absolutely goes to peter cher unanimous and

jeff zucker combined which is interesting in that both jeff on his own and peter on his own felt that aggregation was important and they sometime this conclusion on their own and they eventually met and talked about it and struck a hand shake agreement and announced in the march of 2007. so the first credit absolutely goes to peter chair unanimous and jeff zucker. >> rose: was part of the stimulus to do this that some people were unhappy about what was being put on youtube? >> yes. there was a number... if you take a look at their c ctent, their most precious asset, it was being consumed on the internet, just not in ways that they were actually involved in, whether it be bit torrent client directorys or other venues. >> rose: what is going to be the business model for the monetization of content on the web? >> a number of things. when you look at hulu today we have a free ad-supported model and i think that happens to be the biggest. if you look at the way the premium content is monetized there's a lot of different models out there. sometimes you pay for an

individual episode, for example on itunes, other times you pay for a subscription. other times it's free ad supported. if you look at just in the u.s., it's about a $57 billion industry with regards to ad-supported premium content. that's the biggest pond. >> rose: what is defined as premium content? >> the way i define it is it's done by people who do this for a living. which doesn't necessarily mean it has to be on television. there's a great example called premium content called "dr. horrible sing along blog" which is done by joss whee don, he created "bufffy the vampire slayer." he did that during the writer's strike. that's premium content. you won't find it on television but it's premium. so i think you'll see flavors of it. there will be free ad support which had i think is the most ubiquitous one and the largest one in dollar terms but there's other models that will be a part of monetization on the web including a la carte, subscription and variance thereof. >> rose: how are those that are paid for work out when you pay

for content other thantunes? >> so itunes has been out there for a while where you pay a couple dollars to getting access to a commercial-free version of an episode. you can pay an extra dollar to get an h.d. version of the same content. but i could see a lot of different models where, again, this is all about people deciding what to do with their time and dollars, which is, you know, there's a great price for ad-supported content, which is free in general. and there's also variants where you can pay and have ad-free. so that's the way you see people make decisions. there's also opportunities for high definition versions and portability and all these wonderful things. i definitely think that there's not going to be just one model but many models because consumers deserve choice. >> rose: let me look at your career for a moment. you went to university of north carolina. >> i sure did. >> rose: worked for disney. >> i did. >> rose: and were working for amazon. >> yes. >> rose: jeff bezos has an influence on your life and looking at him as a mentor? >> that's an understatement. jeff is a rare bird. he has the highest professional

judgment of anybody i've just met. >> rose: what does that mean? >> there's... again, i use the term "odd bird" because you don't run into people like him normfully that he's got a combination of a number of different things that most people don't have in one body. he has the discipline and the patience to plant seeds and know that it will take years for them to bear fruit. he's got thenventors neuroses of sorts in that he likes to invent new things and push the envelope with regards to technology and he's got to sobriety to know that these things take time and they take very much a bit of candor to be honest with yourself and your team members in terms of what it's going to take. he's also got the energy to quite frankly be the energizer bunny of sorts to work for long periods of time very, very tenaciously to get to where he wants to go. >> rose: are you surprised that hulu has captured has viewers as it has so quickly? >> in some ways i am, yes. but the reason why i hesitate is

that the reason why the huluu team gave up a lot of their lives and relocated to get going is because we had such conviction that the world needed a service like this. so in our private moment weses certainly have very, very ambitious expectations of ourselves, far larger than anybody else outside the company. so i hesitate because, you know, in our sort of private moments, the team and myself we have very big belief in terms of where have this can go. but in terms of expectations externally, i think it has exceeded most people's expectations if not all. >> rose: and why is that? obviously there was a pent-up demand. >> well, it started... you know, the genesis of hulu was that it had a temporary name called new co. and people in some camps started to call it clown cobecause the history of a venture where you've got big traditional media companies behind it as a joint venture, particularly on the internet, the there's not a long history of great successful

ventures that have those characteristics. and so the expectation were very low at the start because we were called clown co. and in some ways that was a blessing for us because there's nowhere to go but up when people are calling you clown co. and so i think in many ways the bar was low given the history of these kinds of ventures and then i think people suddenly when they actually used the product set aside all that negative vibe and all that negative history and said that they actually liked the product and it truly made an impact on them. >> rose: they liked that they could see premium-quality video material at one source? >> at one source. so there's... i'm a big believer that media is an impulse business. you don't need "30 rock" to live another day. it's not like food and clothing and shelter. and i love "30 rock" but it's discretionary. so the fact that it's an impulse business means that to me if you can make it easer to consume, people will consume more of it. so i think the ah-ha moment for consumers was that basically they could consume "30 rock" when they wanted, when it was convenient after the kids went

to sleep or in the morning when they had a break. and that's very liberating. it's very empowering and i think at the heart that's a big part of the hulu value proposition. >> rose: how much of the video in the next decade is going to move online? >> i think the fullness of time all of it moves online. every single piece of professional content, not just current content but historical content moves online. >> rose: what's the fullness of time? >> i think ten years is a reasonable period of time. now, let me caveat that by saying it doesn't mean the destruction of other venues that quite frankly, are very good venues. so cable, satellite, tell coprovided content. that doesn't go away. there's a long history of that venue specifically in the living room where people are comfortable with that, there's a human behavior element where it takes a long time to change. that said, the internet is such a powerful force, to be able to leverage that pipe and deliver content to various devices, whether it be computers or mobile devices or other devices,

quite frankly, monitors that hang on walls, that's coming. and what i think sometimes people get wrong is how long it will take in certain environments. because it... you know, these things take time. anything that has hardware associated with it takes, quite frankly, a long, long time in terms of driving change. sflup we moving to a point where there will be no appointment television, no realtime television? >> we were to fast forward, programing is always going to be a healthy mix of event programming and on demand programming. there's certain things like scripted dramas that... they're either topical or such water cooler moments that i think they'll be consumed within 48 hours. you don't have to consume them at 9:00, but you want to consume them within the first couple days so you can talk to your friends about it. the susan boyle phenomenon on "britain's got talent." you needed to consume that within the first 48 hours to be in the know. so i think that for high-quality scripted content, that will be sort of an on-demand environment but you look at a lot of

programming today, there's a move to having it be an event program because there's value in that. "american idol" is a great example. the finale of "american idol", that's event television. the super bowl, that's event television. not just sports but there's also a big swath of entertainment that's also event television. >> rose: so you know that the associated press and the "wall street journal" have both expressed some concern that their material is on, say, google, with advertising that google gets paid for alongside their content. >> that's true. >> rose: makes them enormously unhappy. >> yes, it does. >> rose: how will that resolve itself? newspapers who object to content being put where someone else derives the income? >> it's interesting. so i'm of the internet. my whole career is on the internet. and so i see the conundrum that the content owner, in this case newspapers, are in. which is they see a company ining into that will has created tremendous market cap and value for their shareholders and

you're right, there are extracts that come up on those pages and you see advertising next to it. that said, google also creates a lot of value for the content owner in that they're sending people to consume those full articles at that web site. so it's an extract. it's not the full article. and so it's a bit of a... you can't complain about just one side of the coin, you have to actually think about the other side which is that there's a lot of traffic that comes to these web sites from a service like google. >> rose: you were in the content business, whether you were making movies or at a newspaper or as i do a television show, how would you in looking forward want to distribute it and monetize it to the most number of people? >> so.... >> rose: or to the most revenue sweet number of people. >> i think that... i'll start by saying that if you're good at it if you can create high-quality entertainment that people want to consume, that is a very valuable business and the reason

why i they is there's a lot of businesses out there where they're not incredibly defensible because you can get a similar like service from other people. that said.... >> rose: what's an example of that have? >> so if you want a good iced tea, you don't have to go to snapple. you can go to lipton and get good iced tea. they're substitutes. if you want "30 rock" you can't go anywhere but to the people that owns the rights to "30 rock." so no ebs is in a good position because they have a hard-earned monopoly on "30 rock." so with regards to where this goes, if you can create great content in the next ten years, you're going to have a lot more options to monetize that content then you did over the past ten years because.... >> rose: and how will you make the decision between subscription, say, and on the other hand advertiser supported? >> i think there will be a lot of testing, which is... clearly if you're looking for ubiquity in terms of an audience you're going to go free ad support. that's the easiest way to make a hit. you want to make sure the broadest possible people can consume it, make sure there's as

little friction as possible to sample it and that's what free ad-supported content derives. that said, there's also the hbo model which says "i'm going to charge a subscription to getting access to shows like the so ran knows or sex and the city" so i think that has to be thought very carefully, which path do i want to go down. and ultimately it's a series of tests before you know "i want to go down this set of paths for this content and this set of paths for that content." >> rose: so the people who create entertainment programming don't have the same issues that people who own newspapers do because people who own newspapers have to pay enormous expenses not only for print bug correspondents and reporters and editors around the world. >> that's right. >> rose: so therefore that window of revenue is closing on them and the other revenue window is not opening fast enough, they're between a rock and a hard place. >> they sure are. that's not the case in video. (laughs) that said, there's a lot of smart people working on the newspaper side of the coin to

develop new models. >> rose: what's your best guess the way that will end up? >> so, i think that there's going to be devices. kindle gets a lot of press right now. >> rose: it does. so... go ahead. >> deservedly so. they are creating a model that has people get a very valuable thing-- which is newspapers like the "new york times" and the "wall street journal"-- on a device wherever people want to consume it. whether on the subway or what not. and they charge people for it. so that's the beginnings of a business model. i know there's a lot of contention about well, who gets what, how much does amazon get, how much does the newspaper get? >> rose: the contention is not so much who gets what, it's how much amazon gets and how little they get. >> there there you go. >> rose: as you know, you were there. (laughs) >> i'm aware of both sides. so that will play itself out and i'm sure there will be plenty of drama but these things do sort themselves out. i think there's good news, by the way, in that future. >> rose: and a lot of people lining up, including google/sony

combinations andndther people saying the kindle can do do it, we can do it better. >> great ideas attract a lotot f people to that market. >> rose: and there is this question which has lingered for a number of years. the youtube and facebook. >> yes. >> rose: monetizing them. >> yes. >> rose: what's the problem there? >> well, my assessment.... >> rose: is it a different problem? >> a different problem versus newspapers? >> rose: no. among the two of them. these places that have enormous number of hits. >> that's true. that's true. >> rose: and not the revenue that reflects that number of hits. right? >> i think that is fair to say. that is fair to say. and i think there's nuance between the two. they're not... and this is just my assessment, i think you would need to ask them for their thoughts on the topic. when i take a look at it, the situation is, as you say it. which is an enormous audience but another an enormous advertiser reception yet with regards to those companies. on the one side with youtube, i

think a lot of it these do with the environment and the content in that advertisers tend to want to be associated with a certain type of content, which is that they know very well it has a certain quality associated with it that quite frankly that quality has a halo affect to their brand and brand message. sthup's the window you guys found? >> that's exactly what we focus on. so that's the distinction there. on the facebook side, i think it's a bit of an evolution in that that company, which has clearly done amazing things, was i believe, as an outsider looking in was founded on a culture that was obsessive about users and they built a service that is very valuable for users and that is to be applauded. i think challenge for facebook is to develop a culture that has the advertiser and the ad service being b as strong a part of their culture as the user obsession is. that is a trick because cultures are not easy to chap. they're sometimes almost impossible to change. but that i t tnk is the challenge. >> rose: what's the way out for them? >> the way out is for mark

zuckerberg-- and he's doing it, i believe-- is to make sure that's part of the culture. the quality of the advertising service and the efficacy of the advertising service has to be talked about as much internally as the user experience. only when that you have sort of obsession over both of the customers that are actually a part of that business, well, i think you have a great, great traction on the advertising side. >> rose: how would you do that, though? >> you lead by example. i'll describe a little bit of hulu, for example, a day in the life of hulu. we have three customers. we have users, we have advertisers, and we have content partners. we have three customers. we don't have one customer, we have three. and we make all of our decisions in a balanced way and, by the way, our rallying cry as a company is to make sure that we deliver a service that users, advertisers and content owners unabashedly love. which means that the design of the service has to delight advertisers as much as it delights users and we're not willing to settle for less than love, to be quite frank.

and so that's an entirely unique culture because it means that you're boxing your decisions and that you have to make sure that the design of the service is very aesthetically clean for users but also focus for advertisers. and i'm not saying it's easy, but we constantly live that delicate balance between our three customers and not sacrificing one out of the three or two out of the three. that's a huge part of our culture. if you ever stop by the office, i think you'd feel that advertiser focus. you'd feel that user focus and feel that content focus. sthup so you're in the business of finding content. where it's "charlie rose" or "jon stewart" or "30 rock" or "60 minutes," whatever it might be. >> yes. >> rose: does hulu want to say "no only do we want to show you material created by other people some of whom are our business partners, but also we want to create original material for you to compete with those guys. >> we're very... a big part of our culture is that we're humble and we're very self-away, i

guess you could say. we fancy ourselves pretty good at web site design and pretty good at technology. very good at creating advertising services that work. we happen to think that we are uniquely unqualified to create content. we don't write scripts, we don't produce television shows. we are uniquely unqualified to do that. so i don't see that happening. we certainly don't have the capability today nor do we have the ambition to do that. i think that there's so many talented people out there that should be doing that as opposed to a bunch of technology geeks, which is what you find at hulu. >> rose: let me talk about how you put this together which is interesting, and correct me if i'm wrong. >> okay. >> rose: you knew of some very, very bright i think chinese software engineer. >> his name is eric fang. a good friend from my seattle days that i spent nine ten years.... >> rose: amazon and microsoft. >> amazon and microsoft are both in seattle and he and i played texas hold 'em on my front deck in queen anne neighborhood in seattle. so he was in microsoft redmond and then he went over to china.

>> rose: where they have a huge research center. >> huge research center. he's a fantastic talent. he's one of the sharpest guys i know and so humble and just a great person. he was over in beijing and i got a call about what was at the time called new co. and.... >> rose: you got a call from him in? he knew you were going to be the guy? >> i got a call from fox and nbc and i started to talk to peter and jeff and as i was having those conversations, i reached out to eric. so we had a series of midnight phone calls because of the time difference. so i'd call him at 11:45 my time at night. >> rose: it would be 11:45 in the morning for him? >> exactly, the next day. so we would have a series of nightly phone calls about "what do you think?" and we talked a lot about the vision for the company, what the requirements would need to be and that led to he and i jumping into this thing together. >> rose: he stayed in beijing? >> it's interesting. so that story is i... before i started at what was to become hulu, i flew over to beijing to pick him up. so i flew over there and

acquired his.... >> rose: pick him up what does that mean? that's right, he created a software company. he left microsoft to create a software company. >> right. and i went over to basically do due diligence on his team he hired of fantastic engineers and made an offer to him to acquire his team basically, his company, and brought him back to be c.t.o. of hulu. >> rose: chief technical officer? >> chief technical officer and he runs the audience business. so he was... it was very much an "oceans 11" type situation where i was call manager i friends saying "come on, we have to get this thing going." >> rose: so you brought the team? >> i brought the team... we welcomed them to the organization, i should say. >> rose: they're not for sale. not a product. >> (laughs) the engineers stayed in beijing. we started developments over there. it thrives today. it's a fantastic.... >> rose: and they're there and eric's wherever you are? >> he's in santa monica in southern california. he relocated. we picked up our head of communications.

>> rose: from beijing, too? >> she was from beijing. so she's in santa monica in southern california. so we got the company going. >> rose: tell me what this phenomenon means? explain to me the cultural significance of what you just described. and the twhoorld we live in today. >> the way i would describe it is that talent has... knows know geographical boundaries. we're relentless and ruthless about going to where the talent is in the interest of our mission. we've certainly defined ourselves as a global business. if you look at the team, we have a lot of different backgrounds. we've lived a lot of different places. our interest is to create a global service and that doesn't mean that we need to be exclusively located in silicon valley or southern california. so i think the cultural significance is our ambitions and interests are to be a global service. coming from amazon, i know nothing else. the internet is a global service therefore hulu should be a global service. so i think the cultural significance is that we don't worry about things like your

nationality and what your passport looks like. >> rose: hulu can be seen in china? >> not yet. we're hard at work on being able to bring hulu as a service across the global. >> rose: what's the problem? >> intellectual rights are the problem. (laughs) which isn't a problem, it's a good thing if you happen to own them. but it's a gnarlly process legally to make sure you unlock the market by market by market. >> rose: what do they want to know? >> the owners? >> rose: no, the chinese government. >> so, with regards to.... >> rose: they want to know what's coming through the hulu web site, do they not? >> for sure. and our first focus internationally is not china. we happen to have development occurring in china.... >> rose: billions and billions of people. >> it is for sure. and i think it's going to be a very important market, i'm stating the obvious. and i certainly would be very disappointed if hulu was not visible in china in the future, but to set expectations, that's not our first focus internationally. >> rose: and your first focus in europe? >> the biggest markets are

western eueupe. so clearly without going into detatas for competitive reasons, europe is a big focus for us. >> rose: the other thing that's interesting to me about the idea of this is that it's a perfect example where old media and new media came together in a smart way. peter chernan. >> yes. >> rose: and jeff zucker were wise enough to say "we have the content, we create content. we don't know how to put the content on the internet, we are not going to take somebody who creates content here and put him in charge of a company to put content on the internet, what we need is somebody like you who understands the internet and knowing that he has a source of content can make it work." so it is one of those examples where the old media got it right. >> they did. >> rose: and understood how to

make the merger. >> this is so unusual. and the reason why i think it historically has not... you don't see a long line of articles about successes in that space is because imagine if your most precious asset, if you were... you know, you had to make a decision to take your most precious asset that took hundreds of millions of dollars to create, if not more, and you're going to hand it over to some crazy couple of guys from seattle? everybody would say you're nuts! but that's what they did. to peter and jeff's credit, they took their most precious assets and took a lot of heat internally at each of their companies, by the way, and handed over the keys to a couple of guys from seattle. it's almost unheard of. >> rose: by whose salary they are paid. >> absolutely. but it is... keep in mind.... >> rose: or income. >> if you werere to take a lookt the culture of hulu and the set of hulu and the... it couldn't be more different than the cultures of nbc universal and news comp.

now, the cultures of newscorp.... >> rose: in every way. >> by that i mean that the cultures of nbc universal and newscorp are ideally suited to their mission, but hulu's mission is very different, which by saying that it necessitates a very different culture. we all fly coach class. we eat popcorn corn. like we have cardboard boxes that hold up our monitors. very very frugal. that is needed for the culture. the other thing is everybody at hulu is an owner in hulu. that is so different than the cultures in traditional media. but that culture.... >> rose: how is everybody in hulu an owner? meaning all your partners are owners? all the people that provide the content are owners? >> no. >> rose: you mean the people who work at... so your team from... >> my assistant is an owner in hulu. and that's the way it should be. because if we're fortunate to create upside and to create value for hulu, i think everybody at hulu should participate in that upside. >> rose: what's the pair xaer son between the percentage of ownership of your assistant and your percentage of ownership?

>> it's different. but not unlike, for example, if you're at google or amazon or what not. clearly it's not all the same in terms of... with regards to that. >> rose: but if it's very important if you were with those two places and you were there in the beginning. >> there's certainly a risk profile. so with regard to the people... eric is a great... eric fang, the gentleman that i called in beijing. this guy took a tremendous leap of faith and he relocated his family and came all the way over here. that is going to have a reward to it because he took the greatest risk. >> rose: okay. why did they take the risk? i mean, is it because what you are offering is down the road or in the near term offers extraordinary opportunity for income? is it because it offers an opportunity to build something? and what is that something that they think they're building? >> i'm very sober and a realist when it comes to answering this question and i think if you were to get to know our team the vast

majority of folks, if not all of them, are at hulu because they see the promise of a service that they so dearly wanted themselves growing up. there's something very powerful about what hulu can do in terms of making media available on your terms. and to me that's why the people are at hulu. theres a kicker to it. which is if we're able to create a truly special company, there should be a financial benefit and a significant one if we're able to create something truly special. but i think that the financials, if that's what motivates you, you should go work on wall street, not work at hulu. >> rose: or used to work on wall street. >> maybe so. but the daily satisfaction and the smile wes get are on looking at designs and gradients and the responses on twitter about our dave matthews band concert that we live stream. those are the things that put a smile on our face and you can go to bed late at night and say "i'm creating something special." >> rose: you just mentioned dave matthews. what did you do there?

>> dave matthews had a concert here in new york and it was our first effort, actually live stream ago concert. and so we actually prevented the dave matthews band the live concert at the beacon theater on hulu live. now it's available on hulu on demand. so if you want to see it, it was a fantastic show with their new album. >> rose: is that something new? >> brand new for hulu. that was the first time ever live streamed.... >> rose: might you do supporting events and other things? >> we sure would love to. there's so many things we'll see in the future. (laughs) >> rose: i'm sure you would love to. yes, you would. "time" magazine cover story. twitter. >> yes. i've heard of that. (laughs) >> rose: is that an economic model? >> not yet. and i say... i stress yet. i can tell you that it is a business that has tremendous utility. i use it at least 20 times a day. it's.... >> rose: what do you use it for? >> what i do is i go to search.twitter.com and i search for the name "hulu" and do that

0 times a day. the name "hulu" gets written on twitter about 2,000 times a day. is up but you can't read 2,400 times of material, can you? >> it turns out you can as long as you look at it every 0 minutes. so i have a blackberry and look at it every 20 minutes. so i'm not the only one. almost everybody at hulu looks at search.twitter.com for the word hulu. and the reason why we do it is it that it is realtime feedback on the quality of customer experience we're delivering. so we're able to know if we're doing something right and double down on it, we're able to know if we misspelled a word. >> rose: you'll know instantly. >> instantly. so at 11:45 at night i'll see a tweet about, say, a word that was misspelled, for example, on the web site, and i'll be able to send that to our c.t.o. eric and he and i will have a conversation at 11:47 and the site will be fixed by midnight. that's a 15-minute turnaround where without twitter that wasn't possible. it's an amazing transparency

engine. >> rose: what will twitter be in these years? >> my prediction is that in the same way that google is an intent revealing service that can be mob tiesed that way, i would think that if i were at twitter, i would focus on the serge searches a pegt of twitter. because people are revealing intents. that's very valuable to marketers. so i'm just commenting as a sideline observer of it, but there's something valueable in the fact that i'm using it, quite frankly, far lot of searches where before i do not. >> rose: it is an interesting phenomenon. we're talking ant hulu, twitter is on the cover of "time" magazine, we did a show with them. it is... the level of curiosity about all of these things, whether it's youtube or twitter or hulu or so many other new internet expressions is extraordinary. >> and it's beyond... i mean, clearly it is the province of the young. but it's expanding in a... i fifi just a fascinating number

of ways. not just in terms of the ideas but in terms of the consumers. >> there's no better time to be living, i think. i'm biased, of course, but we live in interesting times and as a person that has this odd combination of technology passion and media passion, this is best... this is the golden age of media, i think, because it's leveraging technology to make it better and easier to consume. it gets back to that impulse business. >> rose: finally, two things, someone that you're in town because you received an award and jeff zucker received an award at the american jewish federation. humanitarian ward and other things. >> it was very humbling to say the least. i'm a complete novice at an event like that and to walk into a room and to just see the typei of people there and to be able to have my name mention with jeff zucker's it... you know, i flew my mom up it was so special and she got a kick out of seeing that. >> rose: and brought her here. >> i sure did.

she's right in the green room. >> rose: thank you. thank you for joining us, see you next time. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org