Hulu seems to be doing well for the most part, with traffic growing slightly but with more people spending time on the site watching the content:
In April, Hulu streamed 380 million videos. This month, they're up to a whopping 924 million streams. The chart below from VideoNuze does a good job showing the trend (blue bars are views, the red line represents unique visitors).
But I still think it's mostly a dead end business model. The studios and networks are stuck in a side dish state of mind, where online streaming merely compliments broadcast viewing rather than replacing it. That's just not going to cut it. It'll never realize its full potential so long as Hulu puts the best interests of broadcast viewing ahead of its own. They need to realize that online viewing isn't a supplement, it's a market unto itself, and start acting that way.
That means allowing viewing of full seasons of TV shows and challenging Amazon and Apple in the purchase-to-own market.
Going DRM free at the same time they launch a retail model would give Hulu a huge boost, but they darn well better stop trying to cheat writers and actors out of their fair share once they do start selling online, or this will end up a crap-fest for everyone involved.
The only thing holding Hulu back from being the Google of online TV viewing is the lack of guts and vision on the part of its owners (which, by the way, is not a new criticism of the monolithic TV executive cabal). It will reach a true saturation point if the United States doesn't get moving on a national broadband plan, and if the site doesn't get rid of the ridiculous foreign-viewer blocking. Those viewers can be gotten and monetized very easily, surely more easily and more efficiently than through foreign syndication, especially since most every industrialized nation other than our own has better broadband availability.
And you just know that if Hulu stands still, someone else would gladly come along and take its place.