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Hulu Sub Service Should Beat Netflix

1 Jul, 2010 By: Stephanie Prange

Hulu’s launch of its much-anticipated $9.99 “Plus” monthly subscription service is a move in the right direction for content owners. Co-owned by The Walt Disney Co., NBC Universal and News Corp., Hulu for some time has come under pressure from its content owners to charge for its service, which until now has been free, supported by ads.

Consumers have become all too accustomed to free content on the Internet, subsidized by suppliers eager to get a foothold in the new media. It’s time content owners started to nudge consumers toward paying for expensive studio content. Otherwise, such high-quality content will dwindle.

Unfortunately, the $9.99 price on Hulu’s new service may not be low enough to attract the consumer used to free content, and it doesn’t match the value at Netflix for a similar price. At Netflix, you can get some TV shows and movies streamed, as well as rent the latest DVD hit for $8.99. I’m not sure the lure of Hulu’s offering — which, unlike Netflix, still includes ads — is strong enough to compete.

To truly whet the appetite of the online TV consumer, Hulu should undercut competitors such as Netflix, with, say, a $7.99 or $6.99 monthly subscription price. Hulu should also reward fans of certain shows with a price break on DVD/Blu-ray sets. After watching a couple of episodes of, say, “Heroes,” viewers might decide it’s a show they would like to own.

Netflix and Redbox have taken the rental business by storm not necessarily because their models were more convenient for consumers, but because they offered a better value than any other service.

In these tough economic times, Hulu should be trying to woo these value-conscious consumers, who obviously flocked to the site in part because they could watch episodes at no charge. Offer these penny-pinching fans a great value, and Hulu will build the business. Offer them a price that looks too high, and it might strangle efforts to charge for content.

Judging by Hulu’s cautious entry into the monthly subscription service (membership is by invitation only), Hulu’s owners are treading with care, experimenting to find the best model. I would guess that lowering the price to give Netflix and others some stiff competition will make Hulu Plus take off and create a more-profitable model for online distribution.

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