Hulu.com, that magical place where we all watch our favorite movies and television shows of present and past (Rocky and Bullwinkle, anyone?) free of charge, has announced that beginning as early as May it will institute a so-called “metered” pay wall, which leaves some content free while charging for the rest.
The plan will still allow users to watch the five most recent episodes of popular shows, while the company will charge $9.95 for access to what it calls a “more comprehensive” selection.
Whether this means access to every episode of a show, or simply access to a greater variety of shows or movies, remains to be seen. The service, says the firm, will be called “Hulu Plus.”
Hulu, jointly owned by NewsCorp., NBC Universal and Disney, has recently been facing pressure from its evil corporate owners to stop mucking around and actually make them some real money. Private jets don’t grow on trees, you know.
OK, that’s not exactly fair. Well-produced television shows don’t grow on trees either, and as people begin to cut the satellite or cable cord in favor of on-demand streaming media on computers or mobile handsets, carriers need to have a more viable pay model.
Indeed, the Convergence Consulting Group, recently reported that by the end of 2010 the number of online TV watchers would have doubled to 1.6 million.
Hulu has actually been doing quite well for itself, even without charging a penny for its content.
While the company is only two years old, in the fourth quarter of last year it generated $100 million dollars in revenue, mostly from advertisers.
Its parent companies have not been happy, though, because $100 million a quarter is chump change compared to the real dollars made from broadcast television, and it’s certainly not enough to pay for TV’s expensive production costs. Hence, the pressure on Hulu to move from free to paid.
A $10 transition may not seem like much in monetary terms, but transitioning from free to anything other than free has traditionally been a massive challenge on the internet, the prime example being newspapers’ struggle with monetizing digital content.
Add to that the fact television shows can be downloaded illegally in high quality with relative ease, and the true difficulty of the transition for Hulu shines clear.
Another major challenge to Hulu’s monetization quest is Netflix, the company’s major competitor.
Though Hulu is second only to Google for its number of video streams, Netflix has seen explosive growth in numbers of new customers, with most choosing its $8.99 a month plan, allowing customers to munch their way through as many movies as they want, both online and off.
More than half of Netflix’s users have already used its “watch instantly” function, which streams content directly to their PC’s or tablets instead of mailing DVDs to customers’ homes.
With Netflix’s vast array of movie offerings, not to mention its admirable selection of television show titles, Hulu will have to show why paying a dollar more per month for Hulu Plus is worth it.
Reactions to Hulu’s news have been overwhelmingly negative, with many believing users will reject a pay wall and drift away to other streaming sources or illegal downloads, but I disagree.
Letting people watch what they want when they want it, on-demand streaming is a high-value service. And as content increasingly moves from large screens to smaller mobile ones, Hulu’s value can only grow further.
Taking a quick look at the numbers, 42% of U.S. broadband subscribers have a video-enabled mobile handset, according to market research outfit, In-Stat, while 40% of consumer households have portable media players that are video-enabled.
Convergence’s statistics also show that currently, 17% of total weekly online TV viewers watch at least one or two episodes of a full-length show online, up from 12% last year and predicted to grow to 21% next year.
Meanwhile In-Stat recently told RCR 26% of US Internet users currently watched an online TV show more than once a week, while 50% of 18-24 year-olds and 40% of 25-34 year olds view online TV shows more than once a week.
Detractors say because many of Hulu’s users are young (read: poor), they will be even less likely to pay, but that’s not necessarily true.
Young people already spend $50 – $80 per month on “absolutely necessary” services like cell phone plans with unlimited data and texting, so it does not seem outrageous to imagine them paying an extra $10 to watch Glee to their hearts’ content. So, Hulu may not be hitting a bum note after all
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Igor Hiller is a freelance writer and contributor to RCR Unplugged. He is also the resident advice columnist for UC Santa Barbara. You can read more from Igor over on his blog, DearIgor.com. You can also reach out to Igor by e-mail at igor[at]DearIgor.com
