Wetpaint CEO Ben Elowitz on the Future of Digital Media
I’m not the Amazing Kreskin, and I hardly consider myself a visionary prophet. I’m just Ben. But I happen to live and breathe the digital publishing business because it’s my professional passion.
So, I was quietly surprised to read this week that Hulu’s subscription video service will surpass one million subscribers in 2011.
I was taken aback by Jason’s announcement – not because I doubted Hulu, but because I somehow managed to predict the Hulu Plus subscriber number exactly a year ago.
Indeed, a year ago, in April 2010, I said: “I expect that the service will reach or exceed a million subscribers by the end of 2011.” (See my April 23, 2010 prediction here.)
In life, like baseball, sometimes you win; sometimes you lose; and sometimes you’re rained out.
But the W’s always feel best.
Good job, Jason!
And for the record: I continue to be bullish on Hulu. As long as it can keep its content license agreements humming, it will have a killer collection of content, plus killer experience, to offer consumers; it also has killer context to offer advertisers. And that’s a formula for great success.
Recently I’ve written about why I think the Hulu Plus subscription model will be successful. Yesterday, Peter Kafka (@pkafka) wrote in AllThingsD that Hulu’s price point is both too high for consumers and too low to satisfy media companies. I respectfully disagree.
My prediction is that Hulu Plus will be driving more than $100 million in incremental revenue for the company in 2011. If Hulu grows modestly from its current 19.5 million monthly uniques in the U.S. according to comScore*, and they’re able to convert a small fraction of that audience at $9.95, the numbers are compelling even accounting for the likely double-digit monthly churn. I expect that the service will reach or exceed a million subscribers by the end of 2011. Meanwhile, 30% margin or $30+ million would be welcome for a company that only recently announced profitability, particularly if they’re able to avoid traffic cannibalization on their existing free, ad-sponsored streams.
Granted, most media companies are making more on their own sites, but this is largely upside to their existing online revenue. Meanwhile, a paid model preserves the “premium” value of the majority of their catalog.
Beyond the financial benefit, offering a paid subscription also provides several strategic benefits to Hulu:
Is $9.95 monthly too much for consumers to pay? When your content is exclusive, and more importantly, the experience is this compelling, I think a small but meaningful segment of customers will open up their wallets. Of course, that is assuming that Hulu’s subscription offer and experience demonstrate the same outstanding execution as their free service (and marketing) to date. Many services have failed at charging for video online, but Hulu is in a unique position to finally succeed.
* Footnote: Interestingly this is substantially less than the 43 million uniques announced by Hulu CEO Jason Kilar back in December, perhaps due to the comScore hybrid measurement debacle; I’m using the lower numbers to be conservative