• Los Angeles Times' Company Town blog et al., Thursday, April 22, 2010 12:48 PM

So much for free premium content. Beginning what some analysts see as the beginning of a slippery slide away from wholly ad-supported models, Hulu reportedly plans to begin testing a subscription service as early as late May.

In what is often referred to as a "metered" model, the new Hulu will give away the five most recent episodes of shows like Fox's "Glee" and "ABC's "Lost," but broader viewing will require users to fork over $9.95 a month.

"Hulu, which ranks second only to Google's YouTube in terms of monthly video streams in the U.S.," said it turned an operating profit in its two most recent quarters," reports The Los Angeles Times' Company Town blog -- which broke the news of the change.

Advertising revenue for the joint media venture now stands at about $100 million. Yet, adds Company Town, "That doesn't come close to matching the revenue that these companies are accustomed to raking in from their more established businesses ... That's why Hulu is under pressure from its owners to collect a subscription fee to both bolster revenue and train viewers to pay for online access to professionally produced content."

"Hulu might be turning a profit, and it might be the second-most-successful video streaming service on the Internet (after YouTube), but it's no secret -- in fact, what's the opposite of secret? -- that content providers are less than thrilled with its revenue," writes Fast Company. Case in point, "Viacom pulled two of Hulu's most popular shows, The Daily Show and The Colbert Report, just a few weeks ago."

Venture Beat characterizes the move as "freemium's highest-profile test" -- "freemium," of course, being a new media business model that involves giving content away to attract a large audience, and then offering that audience premium paid services.

Adds Venture Beat: "The move to a subscription model makes sense ... While Hulu remains a popular destination for people looking to watch traditional television shows online, recent Nielsen Online data shows unique visitors have flatlined [sic] over the past year."

Media Memo isn't buying it, however, arguing that the $10 monthly fee is both too much to attract subscribers, and too little to sufficiently offset declining TV ad dollars.

"$9.95 a month -- $120 a year -- is an awful lot to pay for free TV," it writes. Meanwhile, "TV executives expect that Hulu will need to hand over something like $1 to $1.50, per subscriber, to each of its network owners ... Because that's the same price the broadcast networks are trying to extract from cable TV operators in 'retransmission' fights ... So Hulu will need to pay out something like $3 to $5.50 off the top for every $10 it brings in."

Read the whole story at Los Angeles Times' Company Town blog et al. »