Hulu Ditches 'Free' Model Without Giving It A Chance To Succeed
For years we've noted how as a product of the cable and broadcast industry, Hulu has often gone out of its way to avoid being truly disruptive. Owners 21st Century Fox, Disney and Comcast/NBC have worked hard to ensure the service is never too interesting -- lest it cannibalize the company's legacy cable TV cash cow. So Hulu has been doomed to walk the halls of almost but not quite compelling purgatory, a rotating crop of execs for years trying to skirt the line between giving consumers what they actually want -- and being a glorified ad for traditional cable television.
Fast forward to this week, when Hulu announced that the company is backing away from free as a core component of its business model. While Hulu began as a free option, it has slowly but surely been making free content harder to come by. Instead, users now have the option of paying either $8 per month for a streaming service with ads, or a $12 per month service (mostly) free of advertising. As such, the company proclaims that offering anything for free is no longer part of the company's vision of the ideal "Hulu experience":
And because this is the cable and broadcast industry, Hulu's "content strategy" will remain hamstrung by all manner of unnecessary restrictions. Time Warner, which recently paid $583 million for a 10% stake, has been pushing to pull all current seasons of shows from the service. It's also worth remembering that the 2011 NBC Universal merger conditions blocked Comcast from meddling in Hulu management (not that this always stopped Comcast) to prevent anti-competitive shenanigans. But those restrictions will sunset in early 2018, at which point ownership pressure to ensure Hulu isn't too disruptive will only grow.
So on one side, you have Hulu claiming it wants to become disruptive and profitable. On the other side, you have its owners intentionally doing things to ensure it never becomes too disruptive and profitable. And offering free services as part of your business model certainly doesn't line up with the goal of keeping the legacy cable industry cash cow happily mooing for another decade. As we've long noted, most cable and broadcast companies think this whole cord cutting thing is a fad that ends when Millennials start procreating. As such the focus is on the illusion of innovation while they wait for the storm to pass.
While ditching free may not be a great idea, the real threat to the viability of a streaming revolution remains exclusive licensing and fractured content availability. As broadcasters increasingly focus on their own streaming services, exclusive arrangements (like CBS with Star Trek) are flourishing. In Hulu's case, it means losing access to the CW network, now exclusive to Netflix. It also means losing access to the Criterion Collection of films, now the streaming exclusive of a new Turner-owned streaming platform called Filmstruck. This fractured availability only frustrates and confuses customers, many of which will simply return to piracy.
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Fast forward to this week, when Hulu announced that the company is backing away from free as a core component of its business model. While Hulu began as a free option, it has slowly but surely been making free content harder to come by. Instead, users now have the option of paying either $8 per month for a streaming service with ads, or a $12 per month service (mostly) free of advertising. As such, the company proclaims that offering anything for free is no longer part of the company's vision of the ideal "Hulu 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," Hulu senior VP and head of experience Ben Smith said in a statement. "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."Instead, Hulu intends to focus on its subscription services, and the launch of a live TV subscription platform sometime in early 2017. It will offer some free content 8 days after a program's air date, but only via a new Yahoo/Verizon web portal that may or may not even exist next year at this time. Thanks to intentional release delays, a shrinking catalog of free options and other restrictions you'll note Hulu can't specifically claim that the free business model failed, because it was never truly given a chance to succeed.
And because this is the cable and broadcast industry, Hulu's "content strategy" will remain hamstrung by all manner of unnecessary restrictions. Time Warner, which recently paid $583 million for a 10% stake, has been pushing to pull all current seasons of shows from the service. It's also worth remembering that the 2011 NBC Universal merger conditions blocked Comcast from meddling in Hulu management (not that this always stopped Comcast) to prevent anti-competitive shenanigans. But those restrictions will sunset in early 2018, at which point ownership pressure to ensure Hulu isn't too disruptive will only grow.
So on one side, you have Hulu claiming it wants to become disruptive and profitable. On the other side, you have its owners intentionally doing things to ensure it never becomes too disruptive and profitable. And offering free services as part of your business model certainly doesn't line up with the goal of keeping the legacy cable industry cash cow happily mooing for another decade. As we've long noted, most cable and broadcast companies think this whole cord cutting thing is a fad that ends when Millennials start procreating. As such the focus is on the illusion of innovation while they wait for the storm to pass.
While ditching free may not be a great idea, the real threat to the viability of a streaming revolution remains exclusive licensing and fractured content availability. As broadcasters increasingly focus on their own streaming services, exclusive arrangements (like CBS with Star Trek) are flourishing. In Hulu's case, it means losing access to the CW network, now exclusive to Netflix. It also means losing access to the Criterion Collection of films, now the streaming exclusive of a new Turner-owned streaming platform called Filmstruck. This fractured availability only frustrates and confuses customers, many of which will simply return to piracy.
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