How is Hulu able to show closed captions when Netflix does not? That is the $60 million dollar question.
A bit of research online by Jamie and me yielded some clues. First, according to an April 2008 article in Entertainment Close-Up, Hulu is using Signiant Software. Signiant makes digital media distribution management solutions. Google Hulu and Signiant and more articles will turn up.
Poking around Signiant's website led to a blog, Digital Media Galaxy. Searching that blog on "captioning" led to one result, Rhozet Carbon Coder/Signiant Integration Video. That blog post mentions closed captioning extraction capabilities. As best as I understand it, Signiant's software integrates with software from Rhozet called Carbon Coder and through this integration, is able to extract closed captions. A check of the Rhozet website found that the Carbon Coder product is indeed able to extract closed captions.
Not only that, an examination of the Carbon Coder product's additional functions page revealed that under Advanced Operations, Carbon Coder can do subtitle/CC imprint, and line 21/CC conversion.
Last but not least, on Signiant's website there is a page that explains more about Rhozet's Carbon Coder. The information there is so important that I'm quoting it here:
"Traditional broadcast companies continue to grow their content business with alternate media delivery through the web, mobile or Video on Demand (VOD). However, one size does not fit all. They are challenged with the multiple CODECs and containers required to support these delivery mechanisms. Media is often captured in one format; edited in another; delivered live in a 3rd format; stored in a yet another format and so on. With the dramatic increase in the number of formats along with shorter service level agreements and Business To Business (B2B) relationships spanning the globe, content production is becoming more challenging. Rhozet's Carbon Coder is an industry leading transcoder which can simultaneously support all the major formats required in today's media environment."
Based on all this information, I have developed a theory about how Hulu is able to show closed captions. I theorize that Hulu is using the Signiant Software integration with Rhozet's Carbon Coder software to extract the closed captions from DVDs and overlay it onto the streamed media. One of the arguments that we have been given for not having captions on streamed media is that the formats are different between DVDs and digital media; but according to the Signiant page on Rhozet, Rhozet can handle ALL formats.