Seeking Alpha

Hulu wants to eventually offer ad-free option, will charge more

  • Hulu (DIS, FOX, CMCSA) acting CEO/content chief Andy Forssell: "Allowing people to pay more and not have advertising at all, I think that’s the right path long term." Forssell nonetheless defends the ongoing inclusion of ads within Hulu Plus ($7.99/month), arguing the revenue they generate helps the streaming service buy more content.
  • Somewhere, Reed Hastings (NFLX) and Ted Sarandos might be chuckling. The presence of ads is one key reason Hulu Plus' subscriber base (4M as of April) remains much smaller than that for Netflix's comparably-priced streaming services (37.6M at the end of Q2, 29.8M domestic).
  • If Hulu ever offers an ad-free subscription option with pricing competitive with Netflix, it could prove to be a tough rival, given Hulu Plus' TV content library is arguably superior, and offers access to many episodes shortly after they air. Netflix, however, has a superior movie library.
Comments (12)
  • They are going exactly the wrong direction!


    Good for Netflix.
    26 Sep 2013, 06:22 PM Reply Like
  • I think people would overlook ads but Hulu Plus is unnecessarily confusing, you can watch all videos on your computer, but some you can't watch on your phone. And how are they going to convince customers to pay more than Netflix with less content?


    On a related note Netflix should test a $5 plan with ads in their international markets where penetration is low to entice viewers, eventually they could make the other $3 back, potentially more.
    26 Sep 2013, 06:28 PM Reply Like
  • I am a Hulu + sub but i tend to agree with you that the name is a misnomer. It should be called Hulu -. Why is Hulu + not regular Hulu with more stuff but instead Hulu with less stuff that you can watch on your TV and phone? I would prefer to see them add some live content like sports instead of trying to compete with Amazon or Netflix. They already have quite a few less commercials than watching the shows live. Not sure I would pay more to get rid of the few remaining commercials.
    26 Sep 2013, 07:43 PM Reply Like
  • Is Hulu going to still limit the number of episodes it will broadcast of any recent TV show to just five at a time? If so, it remains a horrible non-starter for me.


    Go Netflix!
    26 Sep 2013, 07:30 PM Reply Like
  • Hulu gets 5 at a time same as the cable guys' ON-Demand product, but Hulu Plus has whole season because it is a different licensing scheme. The 5 back is a licensing scheme imposed by the broadcast networks for the ad-supported product.


    Hulu's product is not "better" than Netflix -- contrary to the author's statement, It is principally geared towards same season monetization that its owners (Disney, Fox, and NBC) structured as incremental monetization (since the networks have chosen to sell back-seasons to others such as Netflix).


    Hulu is positioned (at least currently) as "catch-up" TV with a sprinkling of catalogue and niche content. given it's limited content budget, it cant compete full frontal against Netflix's annual $2B+ content spend. Instead it plays a revenue-share model that is ad-supported to help its content partners monetize same season. It is tough chicken and egg proposition to pivot to a premium subscription model because it doesn't have the sub base to go all in on content commitments.
    26 Sep 2013, 08:58 PM Reply Like
  • " Hulu gets 5 at a time same as the cable guys' ON-Demand product, but Hulu Plus has whole season because it is a different licensing scheme. The 5 back is a licensing scheme imposed by the broadcast networks for the ad-supported product"


    I'm a sub and there's some shows they only have like the last 3 episodes of.
    26 Sep 2013, 10:00 PM Reply Like
  • Thanks for catching this William!
    26 Sep 2013, 11:12 PM Reply Like
  • nor can netflix compete with it's own actual 5b buy - thus nflx will have to raise prices to pay for it's already bought content plus future content and thereby lose subscribers (seen this movie before?) or they will go broke - bad business model. Of course profitability doesn't seem to matter to the stock market at the moment - but it will when nflx has to do equity and/or debt raises in a weaker equity environment and a higher interest rate world.
    27 Sep 2013, 12:35 PM Reply Like
  • Netflix is adopting amazon approach: Specific shows, exclusivity and then during original programming and of course cheap catalogs.


    Netlfix should be going to the indie movie festivals and looking for talent and high quality products and securing the talent and/or streaming rights. That would help them reduce content costs and be on the cutting edge.
    27 Sep 2013, 05:05 PM Reply Like
  • it varies by the licensing partner. cable guys are now trying to negotiate whole season for on-Demand and the content guys are resisting because it potentially devalues the monetization for back season.


    David Wells at Goldman conference earlier this week said that they will bid less for content that is over-exposed in response to question about trends where MVPD's are trying to negotiate whole season for current season for on-demand.


    Of course the guy that potentially gets hurt the most is Hulu + since their differentiation would be diluted if the MVPD's get whole season.
    27 Sep 2013, 09:40 PM Reply Like
  • dude, NFLX domestic streaming has increased sequential contribution margins 10 quarters in a row and the embedded operating leverage from a recurring revenue subscription biz is even easy for the blind to see. Netflix is sitting on a billion of cash. domestic streaming and dvd are both huge cash cows (domestic streaming now has out-run DVD contribution), and the only dilution comes from new international launches. International itself keeps on creeping up as the sub-base grows and each new market launch is increasingly less dilutive due to the margin accretion on the international base. you erally should borrow every single cent that you have to short this stock if you feel that strongly that it will go bankrupt.
    27 Sep 2013, 09:46 PM Reply Like
  • Dear Hulu you know what I would pay extra for? No, not the removal of ads. Consistency! When I want to watch a current season episode of a show you have in your catalog, I should have access to every episode for every current season show. As a "paying subscriber" I should be able to decide what device I want to play shows on not you. Though I shouldn't have to pay "Extra" for this, I would. How do they come up with this stuff?
    26 Sep 2013, 09:35 PM Reply Like
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