Hulu, the online video service, is planning to introduce subscriptions. Users will still be able to the five most recent episodes of popular programmes for free, supported by advertising, but will have to pay $9.95 a month for further programming. Reports suggest the subscription service will be known as Hulu Plus. There are also plans to extend the service to other devices, such as the Apple iPad and iPhone. Extending a service that has been seen as free into a subscription model will be a challenge.
Jason Kilar, the chief executive of Hulu, recently told the New York Times: “Our mission is to help people discover the world’s premium content, and we believe that subscriptions can help to unlock some of that, including sports and movies and premium cable shows. We’re certainly open to subscriptions as a complement to an ad-supported model.”
Hulu reports revenues in 2009 of around $100 million and claims that it is now achieving an operating profit. Hulu may be covering its costs with limited advertising, but that does not reflect the cost of programme production.
Companies like Netflix have successfully established online subscription services. Netflix offers any number of movies and some television programmes for $8.99 a month, streamed online to various devices, in addition to its DVD distribution service.
Meanwhile, cable companies like Comcast are working on their own TV Everywhere plans that will make programming available online to pay-television subscribers. Comcast is planning to acquire NBC Universal, one of the three main shareholders in Hulu, subject to regulatory approval. It is unclear how far it will be prepared to back a service that competes with its own subscription offering.
SeeSaw, which aims to offer a similar service to Hulu in the United Kingdom, is also investigating the introduction of pay-per-view and subscription revenue streams in addition to advertising.
The lesson may be that it is important to condition consumers to a paid proposition from the outset rather than retrospectively attempting to extend a free service into a freemium model.