Hulu to start charging for online TV?

The report is still unconfirmed, but the rumored pay model looks good.

By Money Staff Jan 21, 2010 3:19PM

By Chadwick Matlin, The Big Money

 

Wednesday was the day The New York Times made its paywall announcement. Today it’s (sort of) Hulu’s turn. The Los Angeles Times published a scoopy piece today about Hulu’s future as a company with a pay model.

 

It’s important to note that none of the L.A. Times’ reporting is confirmed; all of the information comes from “people familiar with the matter who were not authorized to speak publicly.” Nevertheless, the highlights:

  • You’ll still get the past five episodes of a show for free.
  • Beyond that, you’ll have to pay $5 a month for access to a larger library of back episodes.
  • Per the L.A. Times: “Hulu believes it will need at least 20 TV series -- both current ones and those no longer on the air -- to make such a pay service attractive to users.”
  • This whole thing could come out in the next six months.

To which I say: Yes! Wonderful news all around.

 

As outlined back in October, Hulu must become a paid-for service to realize its full potential. Hulu’s goal should be to become a dynamic library of content on the Web. And you can’t build a library without a little bit of fund raising.

To access the full archive, you’ll have to pay, but to access the recent releases, you can waltz in whenever you want. Keeping the most recent content free encourages people to come back every week, which helps make those users more attractive for advertisers.

Offering a deeper well of content entices committed, loyal subscribers who are also attractive to advertisers. (Probably display advertisers rather than video advertisers, since -- and this is conjecture -- they’d likely remove ads for paid subscribers.)

 

Bing:  Catch up your favorite TV show online

 

I’ve e-mailed Hulu to see if it has a response to the Los Angeles Times story. I’ll update this space if it does.

 

While we’re here, we might as well compare and contrast this rumored paywall to The New York Times’. Theoretically, Hulu could have embraced the Times’ metered paywall. (And, to reiterate, still could, since the L.A. Times’ story is unconfirmed.)

The N.Y. Times is going with a metered system that allows a limited number of articles until users have to pay a monthly subscription. This allows people going in to nytimes.com from other sites to still read content and earn ad revenue for the paper.

 

But Hulu doesn’t work like that. Hulu runs on two things: embeds and appointment viewing. Hulu’s best philosophical statement has always been its desire to have its videos embedded across the Internet. The strategy made a certain business sense.

With video, nobody needs to actually go to hulu.com to enjoy Hulu content and see Hulu’s ads. This means people aren’t going in to hulu.com via other sites as nytimes.com visitors are. Hulu’s content is already directly embedded into those other sites. Bloggers aren’t as likely to use the embeds if users would have to log in to see them.

 

So, yes, Hulu could let you watch a certain number of videos or minutes before a paywall kicked in, a la the Times. But it’s an entertainment, not a news, platform.

Hulu’s built-in advantage is that people need to come back week after week to watch the most recent episodes of their favorite shows. This breeds a devoted following. Allowing only, say, 10 streams a month means you can only watch three shows on Hulu, at most. That forces the consumer to make hard choices about what it will watch on your site.

Hulu suddenly becomes a diversion, not a destination. If you can’t find everything you want to watch there, what’s the point of thinking to watch anything there?

 

Which is why this rumored tiered approach is far preferable. It allows the site to discover who its most loyal users are without losing touch with its most casual ones. And if Hulu needs to move the chains -- to make it the past three episodes free instead of the past five -- it can as time goes by. Plus the payment structure helps build an archive of shows to help entice more users to pay for full access.

 

Just yesterday a friend e-mailed me to say he was behind on "Lost" and asked where he could catch up. After I told him the episodes were on Hulu, he wrote back, “God I love the Internet.” Hulu may have finally decided how best to capitalize on that love.

 

Related Articles

 

Is NBC Censoring Conan O’Brien on Hulu?

 

Comcast Makes an Untrustworthy Promise to Protect Hulu

 

Disney Plans Its Own Streaming Service Despite Co-Owning Hulu

Chadwick Matlin is the staff reporter for The Big Money. He can be reached at Chadwick.Matlin@gmail.com and—surprise!—on Twitter.

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