‘Hulu Plus’: Hulu Is Readying $9.95 Subscriptions, And They Will Work

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.

Hulu vs. The Networks – The Networks Would Be Foolish To Isolate Themselves

HuluVentureBeat featured a guest-post from Transpond’s CEO Peter Yared yesterday, and editor Matt Marshall asked me to offer a comment for inclusion.

Peter presents an argument and five predictions as to the balance of power and profits between Hulu vs. its corporate constituents tilting back further towards the content owners:

Hulu sells ads on the video it streams, meaning that Hulu’s ad sales team competes with the networks’ own ad sales teams. Hulu’s sales pitch to the networks was, “let us compete with you on your new content and we will help you monetize your older assets”. But Hulu hasn’t been able to monetize the older TV shows it runs. Pull up any TV show over two years old on Hulu, and all of the ads are public service announcements.

But the original reason for Hulu was not that the networks thought they couldn’t monetize their inventory, but because they believed in the power of a single consumer destination with major network effects.  And that is by and large working.

As I responded in the VentureBeat post, Hulu is working and it’s because they nail their consumer experience.

It is inevitable that in the digital future, consumers will watch what they want, when and where they want it.
Read the rest of the the post, including my featured response about how the networks would be foolish to isolate themselves, at VentureBeat.

For Hulu Too, Ads Won’t Be Enough

Michael Learmonth at AdAge published an analysis today of Hulu’s financial conundrum:  while Hulu wants to remain purely ad-supported in order to grow its audience, it is struggling with the economic realities that make its current advertising-only model lackluster.

But while Learnmonth’s article portrays “an ideological battle over its future” of whether to stay solely ad-supported vs. consumer supported, I can’t help but read his analysis and take away that it is inevitable:  for Hulu too, just like for the rest of the media industry, a healthy and sustainable model will only be reached when consumers pay for content.

Hulu has attained remarkable success.  It’s the #2 video site by audience, and has created a true breakthrough consumer experience for video that is best in class — and miraculously not only survived the minefield of investor and content provider relationships but prospered with them.  But with the hefty 70% revenue split paid to content providers, Hulu is still challenged to make money on a standalone basis.  Just as the TV networks themselves have seen, the dual (consumer+advertiser) revenue streams of the cable and satellite systems create a much healthier model.

Hulu’s struggles are just another case of how — almost no matter how large the publisher is — advertising revenues are no longer enough for a healthy publishing model.  With an explosion of content created and the huge dispersion of where consumer eyeballs land, the advertising dollars can’t be piled on the way they used to be for the top publishers of content.

It is time for Hulu to — creatively — start offering premium consumer services.

The good news is that Hulu is in pole position to succeed at getting consumers to pay part of the bill.  Under CEO Jason Kilar’s leadership, Hulu has demonstrated that they are extraordinarily strong at product development and partner relationships in a way that lets them make a surprisingly great experience for consumers even with the myriad license restrictions that they need to deal with on the back end.  On top of which, their proprietary content library is worth billions and has earned them destination value for consumers.  They’ve got advertiser relationships and track records, and have even established a strong premium pricing precedent at reasonable fill rates on the ad side so they can keep their appeal broad with a free basic offering.

With those great assets, Hulu has the opportunity to build new applications, content packages, features, and other enhancements that are compelling enough to earn consumer payment.  All of which will put them in a healthier position to not only make profits for themselves, but for their partners.  In fact, for Hulu, it’s not only for the good of themselves and their partners that they should add paid offerings, but for the good of the industry in pioneering the best ways to offer experiences the consumer will pay for.

Viacom Takes Its Toys and Goes Home

Tug of WarViacom this week told Hulu that it is pulling its content out of the video site because they couldn’t reach economic terms that value The Daily Show and Steven Colbert to Viacom’s satisfaction.  Brian Stelter reported the story for the New York Times this week, quoting me with reference to the ‘game of chicken’ that Viacom has been playing with Hulu.  This game plays to chairman Sumner Redstone’s strengths, as he’s already presided over the protracted “off-again, off-again” conversations by which Viacom’s sister-company CBS has held out from Hulu.

But these negotiations over how to divide the pie miss the opportunity altogether.  Against all odds, Hulu has surprisingly created  a successful consumer destination.  With a great consumer experience, Hulu has become *the* destination for “official” TV video.  While media executives fret the impending decline of television, the future has already begun to gel at the site with an audience of 30 million,  advertiser demand, and premium monetization.

The shame is that Hulu CEO Jason Kilar and his team have their efforts drained by brinkmanship negotiations with the industry.  What a waste of time!   Instead, what would benefit all parties — Hulu, its equity partners, and  the industry at large —  is for Hulu to spend time on improving the consumer experience, enticing audiences, and monetizing.  Further, Hulu may be in the best position of any media venture to command premium and subscription pricing from consumers — so additional content and scale could help make digital video more profitable. Unlike the drain of the power games that Viacom is playing, these constructive investments would have the prospect of lifting the fortunes of the media industry for everyone’s benefit.

While Hulu offers hope for the industry, Viacom crushes it.

TV News Is Breaking — Can ABC Make A New Model?

ABC has begun today the process of restructuring its news operations, indicating planned layoffs of 300-400 employees.  The six-point memo from ABC News President David Westin presents the changes as an overhaul of how the network produces news to match the “revolution in the ways that people get their news and information.”

But what we need now is a revolution in how content is created, not just in how it’s consumed.  The real value isn’t in production efficiency for its own sake, and  I’m surprised Westin missed the opportunity to define how ABC News can use this restructuring as a weapon to not just serve but grow audiences.

Yes, the changes will help ABC be more competitive on the cost side of the business by shifting the workforce into more flexible (and overall, far fewer) roles — doing more with less.  Taking advantage of digital technology, the news industry no longer needs as many specialty roles to manage equipment and content.  The technology is so much more accessible, portable, and efficient now that an it can all be at he fingertips of a single content creator.

Well beyond cost reduction, however, a vision of a more flexible workforce has real implications for audience — which is far more important of a lever on ABC’s business.  If ABC can reduce the size of its working units, and evolve them to be more flexible to deploy, it should translate into the network being able to cover more stories, sooner, deeper, and better than competitors.

Additionally, if ABC can maintain its quality level of reporting in the new structure (and I think the news network should be and is deeply committed to doing so), it can scale its operations up this way, two ways:  both with its own proprietary content, but even more interestingly, allowing it to integrate third-party and user-sourced content into the conversation.

The upcoming layoffs and restructuring will be painful, but this action is a sober and proactive recognition of the changing rules of the game.  And if ABC executes right, it may not only be able to position itself as a leader of the new game, but to even establish some of the new rules of play.  They certainly are indicating the right orientation to guide them:  it is all about the audience.