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Hulu pushes forward with $9.95 subscription service

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Hulu, the popular online site for watching television shows, plans to begin testing a subscription service as soon as May 24, according to people with knowledge of the plans.

Under the proposal, Hulu would continue to provide for free the five most recent episodes of shows like Fox's "Glee," "ABC's "Lost" or NBC's "Saturday Night Live." But viewers who want to see additional episodes would pay $9.95 a month to access a more comprehensive selection, called Hulu Plus, these people said.

Hulu, which ranks second only to Google's YouTube in terms of monthly video streams in the U.S., said it turned an operating profit in its two most recent quarters. The 2-year-old service, which is owned by media giants News Corp., NBC Universal and the Walt Disney Co., generated more than $100 million in revenue from advertising.

Still, that doesn't come close to matching the revenue that these companies are accustomed to raking in from their more established businesses. That's why Hulu is under pressure from its owners to collect a subscription fee to both bolster revenue and train viewers to pay for online access to professionally produced content.

Television executives don't want to suffer the same fate as music industry or newspapers, which saw users flock to free access to songs, stories and classified ads online -- and revenues plummet.

In the past, Hulu primarily offered shows that were broadcast over the air for free. But now, as the major networks are trying to extract payments from cable operators and television station groups, they can no longer justify offering the same shows online for free. Shows on Hulu also carry commercials, however there are fewer spots there than on regular television. Ultimately, Hulu is expected to adopt the same commercial loads as network television. 

Hulu did not immediately respond to requests for comment.


--Dawn C. Chmielewski and Meg James

The Hulu video player displays a scene from "Arrested Development." Credit: Twentieth Century Fox and Imagine Entertainment.

 
Comments () | Archives (134)

I will never use Hulu again if they add a subscription fee. That doesn't make the least bit of sense for me, as a viewer, to pay $10 per month for shows that will also be loaded with the same level of commercials as on television. Good bye Hulu, I loved you while it lasted.

I still cannot understand why the network executives insist upon comparing offline distribution revenue to online distribution revenue. Distributing online is far cheaper to do and ads can be better targeted to desirable consumers.

One of the most important things that Hulu does is get people to watch TV shows and movies online legally AND sit through limited commercials. This short-sided viewpoint will only drive many people back to torrents and to pirate sites.

So misguided. With the current state of technology, it's actually more difficult to avoid commercials on Hulu than it is on a tv/dvr. You can't fast forward through a Hulu commercial. By "training" viewers to pay, they'll simply end up forcing viewers away. Hulu appeals to those who don't want to pay for both internet and cable tv or those who want to watch programming at work or in transit. It's difficult to imagine even a fraction of that demographic coughing up their cash to access a "plus" service.

Ad revenue on Hulu may not ever reach the magnitude of revenue generated for live programming but in many ways it is already a superior form of revenue insofar as the Hulu audience is more captive and the data for viewership is more precise. As a consumer, I'm obviously disappointed by the decision to charge for any Hulu programming but I think this will soon be looked at from a business perspective as a mistake of epic proportions made by trigger-happy myopes that - like most of Wall Street - are more preoccupied with quarterly returns than long term viability.

Talk about greed! First of all, they're already turning a profit but they want more, second, they expect people to pay $10/month (on top of their internet service fee) and put up with as many commercials as free broadcast TV and third, the actors in the content are getting no cut, no residual, NADA out of their work being used online...I need to meet the people putting this through because you just know they're going to get a multi-million dollar bonus for this project.

why would the majority of people pay for a service to watch shows they can download illegally for free? don't these companies know at this point that people don't care to pay for what they are providing (regardless of if that's right or wrong). i have a dvr and i NEVER watch commericals. thank god for that.

oh well, goodbye Hulu. Don't need you that badly.

I'm sure we will still be subjected to the advertisements. Cable TV Business Model Redux....

The Hulu videos have commercials. If they are shorter, that may be OK, what is the effectiveness of the ads during a certain program? ... do they yield more or less to the advertisers in net purchases and therefore eventually yield the same or better per show viewed as broadcast. Eventually the costs of distribution are going to be way lower over the internet even if they are way higher now.

If they can't get sufficient net yields, maybe those shows aren't worth it to Internet viewers that have millions of hours of other things to do, like facebook, readings, video games etc ... if the show wasn't compelling enough, convenient enough or otherwise not worth watching on TV, there was Zero revenue to be gained from that individual anyway. Its all incremental revenue--gone forever if not harvested.

Whats missing here. A dream of getting a subscription that the likely users wont pay. Sounds like the NY Times experiment on subs. Those people would never bought the physical paper and won't pay for a few articles when they would have to have 5 subscriptions to cover all of the media they read. People don't have that kind of money and besides they've already wasted that on their Internet and Smartphone plans ... i.e. its gone.

It will be interesting to see if a lot of users flock to this. I always pictured the typical Hulu user as someone trying to keep up with a missed episode, rather than trying to get into a series that has been on for some time.

It might make more financial sense to do free bandwidth limitation and then require users to pay a flat fee per month beyond that.

Who on Earth would pay $10 per month for old episodes of shows? It seems like they have things backwards.

I used to love Hulu but if they start charging then I will definitely stop using it. They need to find a better way to monetize content.... and charging people is NOT the way. This is only going to be disaster for Hulu. I hope they fail.

The goal is to charge for everything (and tax it)

The internet service providers will have to install filters for all copyrighted materials, and the FCC is pushing to eliminate Over-The-Air (Free) television also.

It is closer than you think!

Bye hulu. It was fun while it lasted. We'll miss you.

That's NewsCorp for ya! Rupert Murdoch is obsessed with brining the antiquated business model of paying for content into the 21st century. The idea of "training" viewers is a joke.

Furthermore, this quote is a bit misleading:

"Television executives don't want to suffer the same fate as music industry or newspapers, which saw users flock to free access to songs, stories and classified ads online -- and revenues plummet."

Consider, for example, how digital music sales (via iTunes and so forth) fare against CDs. Certainly the former is booming right now, but execs. are mad that they can't make the same amount of profit as easily as when the latter was king. The same goes for other industries where we're seeing a sort of changing of the guard. Those who were in power are upset by this change in status quo and are still, apparently, having a hard time figuring out the new rules of the game.

I think what they're missing is what this would inevitably do to DVD sales--I mean, the only reason I could see for paying $10 to watch old episodes is to avoid paying $40+ to buy a TV show season on DVD... and in that case, I'm actually getting a steal. They should really think this through a bit more.

One word -- torrents.

I lived without hulu once, I can do it again.

Here is what will happen:

Hulu will start charging.

People will start grabbing their shows from private torrents.

The media content providers will complain.

The Congress will pass the ACTA and the Copyright Czar will agree to the RIAA/MPAA's suggestions of placing filtering software on all computers in the US, in what I refer to as the Great Irony Wall of the US.

The Tea Party finally goes mainstream.

I use Hulu to both view programs I liked or missed such as Airwolf, etc., and to also watch current programs as I have no TV or cable and watch everything on my computer.

I don't mind the shorter and fewer ads and actually sit through them where I skipped the ads completely when I had a DVR.

If they start putting as many commercials in Hulu as in broadcast, they are going to lose my attention. I can bring up Solitaire or my web browser during the commercial if it gets that intrusive.

If they want me to pay $10/mo., they better start offering shows from other networks rather than just the main broadcast ones, or again, they will lose me.

LOL...the best part about Hulu is that it doesn't over do the ads while providing great content and for free.

I'll be surprised if they see any traction with a $10/mo subscription fee. Why would I pay $10 to see old episodes? If I really care enough about a show to pay $10/mo to access the episodes ($2.50/episode), then I'm certainly not going to be 5 weeks behind on the show.

Hulu and its owners are grossly overestimating the value of the content they're providing. Give me live streaming of shows and zero ads and MAYBE I'll pay a $15-20/yr subscription, but even that's debatable.

Here's a solution: Get an over the air antenna. Broadcast is still the only free TV there is.

Pay $10/month? I already do that. It's called Netflix. Buh bye Hulu. It was fun while it lasted.

I'd pay the subscription to AVOID the extra commercials. Hopefully, they'll offer a free option with more commercials and a pay service to keep them to the mini breaks they currently have. But, if they go for it all...

So, I would want to pay a premium price for access to old shows cluttered with the heavy commercial load of regular OTA television .. why, again?

I'd gladly pay $20 / month if both old and new episodes were commercial free, in HD, and if it was a channel on my Roku box.

Then I could finally get rid of Dish.

 
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