Digital Quarters – Ben Elowitz

Dawn Chmielewski and Meg James reported tonight that Hulu will begin testing a $9.95 “Hulu Plus” subscription offering as soon as May 24.  According to their LA Times article, the Hulu Plus offering will open access for viewers to watch many more shows than are currently offered.  (Hulu’s content license restrictions currently allow viewers access to only the five most recent episodes for most shows.)

Last month, I wrote that for Hulu, advertising won’t be enough.  Tonight, I predict Hulu’s subscription program will be successful with consumers, and will be a business success for Hulu.

First, here’s why — unlike many other subscription programs — Hulu’s will work:

• Outstanding experience: Hulu has nailed the consumer experience. From their innovative video player to their Hulu Desktop application, they have an experience that is worth paying for.
• Shows people desire: Hulu has the  TV shows that every household knows and wants to watch.  These are among the most popular entertainment brands around.
• Exclusive access: The vast majority of consumers (i.e. those who won’t use BitTorrent) simply can’t get this content anywhere else, thanks to Hulu’s exclusive agreements with content providers.
• A great value proposition: Compared to typical cable TV, on-demand packages, and Netflix, Hulu offers outstanding variety at a modest monthly fee.

Net, this is an impressive combination.  Unlike many of the subscription offerings being floated by others, which move information that can be found in many places behind a paywall, Hulu’s offering is unique enough and compelling enough that  it’s worth consumers paying for.

As for the business benefit to Hulu, they are already receiving high monetization.  At reported $100MM annualized revenues over comScore-reported 695MM pageviews per month, Hulu already monetizes at $12 per 1,000 pageviews.  Even if subscribers view 10 times as many pages per month as average users, Hulu will still more than double its revenues from those customers.

With an outstanding value proposition and great monetization potential, this subscription program is a win-win for Hulu and its audience.