Friday, April 23, 2010

Not Your Father's Hulu -- Moves to Subscription Model (and That's a Good Thing)

Online video site Hulu -- directly in the cross-hairs of the Internet TV v IPTV battle royale -- is extending into the experimental world of paid subscriptions. Although its "free" Internet TV model (not really free, but ad supported) generated $100 million plus in Q4 2009, that's not nearly enough to compensate for viewers gravitating away from lost television revenues. So, to expand its business model, Hulu will dive smack into paid subscriptions in addition to its ad supported model, offering expanded content offerings for $9.95 per month.

And, that's a good thing.

Why? Because Hulu, of late, has been CONtracting its content offerings rather than expanding them as a result of pressure from the major cable companies and telcos (one of which, Comcast, has a significant ownership stake in Hulu itself) -- and that would be the kiss of death. You can't be a successful content destination site without ... well... content! So, giving consumers more of what they want -- rather than less -- is the right thing to do. More really IS more. And, content is monetizable -- just because it is freely available on the Internet via an Internet TV model does not mean that it is really free (for example, with Hulu, you ARE paying for it when you watch it, because you are seeing ads). Content owners will be able to monetize it via ads, paid downloads, and subscriptions. No one has cracked the code yet on how best to do it (or what combination works best), but it will be done out of necessity.

So, Hulu is doing the right thing by trying to find that winning combination -- by experimenting with paid subscriptions -- so that it can build its content offerings (rather than dismantle them, as it has had to do of late). So, for all of you whiners out there who are bemoaning Hulu's new move, get over it! Premium content owners DO need to get paid -- yes, Virginia, there really is no free lunch.

(But, even though Hulu's new initiative makes sense, it does not mean that its initial subscription "package" is sufficiently compelling. Take Netflix for example. It is offering unlimited online viewing of its entire catalog for $8.99 per month.