Video streaming service Hulu has added a new option for subscribers who don’t like ads: For an additional $4 per month, customers of Hulu Plus, its premium streaming service, can watch video content on the service without ads. The ad-free service costs $11.99 per month.
Subscribers can stream with ads, as they have since the introduction of Hulu Plus in 2010, for $7.99 per month. Hulu’s original free tier, which offers a limited selection of shows, remains available.
The move comes amid a boom time for online streaming services. These services tend to choose one of two options for monetizing: ads, or subscriptions.
Hulu has been one of the few video streaming services to try to have it both ways, charging a monthly subscription fee for its full catalog, while also showing ads to its subscribers.
The strategy makes sense if you’re a TV executive: People pay for cable TV subscriptions and tolerate ads in cable shows. It also makes sense that Hulu has clung to such a strategy, even as its competitors have picked one or the other. Hulu’s owners—Disney (DIS), 21st Century Fox (FOX) and Comcast’s NBCUniversal (CMCSA)—are all from the traditional TV world. (In a likely compromise with its owners, ad-free subscribers will still see a 15-second ad before viewing seven of Hulu’s most popular shows.)
But online, customers aren’t as tolerant of ads. Services like Netflix (NFLX), HBO Now, Amazon Prime Video (AMZN), and Showtime’s streaming offerings have proven that viewers are willing to pay for premium video content without ads. Meanwhile, ad-supported services like YouTube, Yahoo (YHOO), AOL (AOL), and Hulu have proven that viewers are willing to endure ads to watch free video content.
But with so many options for premium video content online, it has to be one or the other, not both. If viewers are going to pay, they don’t want to sit through ads.
Today, Hulu shows it values the revenue from its nine million Hulu Plus subscribers enough to give them what they want: no ads. With more and more new entrants to the streaming service category, competition is increasing, and Hulu has stepped up its game. Earlier this year, the service outbid competitors for the rights to Seinfeld in a deal worth a reported $180 million. More recently, Hulu snagged a deal with distributor Epix, stealing the rights to “The Hunger Games” and “Transformers” away from rival Netflix. The battle for cord cutter’s wallets is only intensifying.
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