Hulu will stop providing free-ad-supported TV episodes. Instead it will become a subscription only, premium video service. Here are 5 reasons why this could be a big mistake.
According to Ben Smith, Hulu senior VP and head of Experience:
“For the past couple years, we’ve been focused on building a subscription service that provides the deepest, most personalized content experience possible to our viewers. As we have continued to enhance that offering with new originals, exclusive acquisitions, and movies, the free service became very limited and no longer aligned with the Hulu experience or content strategy.”
Hulu does still have the rights to provide recent TV episodes free-ad-supported. However, going forward people will have to visit partner sites to watch it. One of those partners is the new Yahoo View, launched to replace the failed Yahoo Stream. Yahoo and Hulu announced an extension of their existing agreement to bring the free shows to View. The shows will play in the Hulu Player and Yahoo and Hulu will split the ad revenue.
Hulu was originally founded on the premise of free-online-TV, so it is a big step for the company to eliminate it completely. It also could be a mistake. Here are 5 reasons why the move could hurt the company, not help it.
Reason #1: Fragments the audience
I have talked about how fragmented video is becoming online. Hulu has been one of the sites swimming against that tide. People knew they could come to the site and find an episode of a show they had missed or of a new show they had heard about from a friend.
Now consumers are forced to look elsewhere. Instead of remembering one site, they will have to remember many. This can only add to the confusion of the audience, and confused audiences are never a good thing.
Reason #2: Reduces ad avails
Ad inventory in quality content is still at a premium online. Hulu is one of the few sites outside of TV Everywhere properties to provide quality inventory. Abandoning free-ad-supported entirely reduces the number of ads the company can sell, and the number of potential people that will see the ads.
Of course, Hulu will still get some ad revenue from its partnership with Yahoo. But let’s be honest. Yahoo’s track record in video is pretty dire, and with all the upheaval at the company, it isn’t likely to do very well with View. Chances are Hulu could do much better with the free viewing on its own.
Reason #3: Disables the freemium opportunity to upsell
Hulu is one of the sites people turn to first to find recent episodes of their favorite TV shows online. Having a strong free component expands the influence of the site to many times the number of paying subscribers. Every time a non-subscriber comes to the service, provides an opportunity to upsell them to a subscription tier of service. Without the free episodes, the only reason to come to the site is to subscribe or to get information on packages.
Reason #4: Helps competitors
The skinny bundle space is becoming increasingly crowded. Sling TV, Sony Playstation Vue, and fuboTV are already providing services online. DirecTV and Century Link will be joining them soon. And pay TV operators are offering their own slimmed down bundles. With a strong free component, Hulu would have had a clear differentiator from everyone else in the market. Now it will be just another in the crowd.
Reason #5: Misses a golden opportunity
With a strong free component, Hulu could have established itself as THE aggregation point for TV online. This is a powerful position to be in, and who knows where it could have led. After all, the web has a habit of anointing a single company as the big winner (Google for search, Amazon for shopping, iTunes for music, etc.)
Without free quality content, all sorts of opportunities open up for other companies in the space. For example, Apple is rumored to be looking to step into the unified search and guide arena. Would that be so valuable if a user could rely on Hulu for TV search?
Why it matters
The Hulu free TV option is being eliminated from the site
Without it, the company loses a key differentiator from other competitor services.
It will make it much harder to differentiate its new skinny bundle service when it is released next year.