Commentary

Hulu's New Pay Service: Remind You Of Something, Circa 1975?

Hulu's move to start a pay service for $9.99 a month isn't new in the world of television. It actually follows one of the now-oldest alternative platforms of TV, which really got going in the late '70s: pay cable TV networks.

And while some may complain about Hulu's move, here is the good news for media executives: the pay TV platform is thriving.

HBO, Showtime, Starz and others are growing, so much so that other media companies -- like Viacom, MGM and Lionsgate -- believe that there is room for another pay cable group, Epix.

When TV companies shook the entertainment world about five years ago by taking their TV shows online, critics almost universally noted that pay cable TV networks in particular would be hurt by this move.

That never happened. In fact, those networks have thrived. HBO is now at some 41 million subscribers, pulling down just under $4 billion in revenue from cable subscriber fees. Profit margins for pay TV channels have grown to 30%, up from 20% in recent years.

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It's no surprise the big media partners behind Hulu -- Walt Disney, News Corp. and NBC Universal -- have been very verbal in their proclamations they want a part of Hulu to be a pay service.  It's their content, after all.

While a free, advertising-supported TV service fosters some nice consumer feeling, media executives know consumers will pay up for entertainment stuff they want.

Everyone worries that the prospective owner of NBC Universal -- Comcast Corp -- might morph the NBC network into a cable channel. 

They won't have to. Future NBC programming through Hulu or other digital platforms will surely have a consumer fee component, if not a combo consumer fee and advertising revenue component.

Of course, initial consumer response to Hulu's paywall was negative. Almost 83% of those surveyed in an iTunes poll said it was a bad idea.

Perhaps the real competition for pay TV and premium sites like Hulu is the other big form of entertainment: theatrical films. At $15 or $20 a ticket for one theatrical movie, pay TV and pay-Hulu, with even bigger in-home TV screens looking to compete with in-theater screens, might be viewed as a deal for around $10 a month.

Consumers may be upset now. But history tells us something else.

2 comments about "Hulu's New Pay Service: Remind You Of Something, Circa 1975?".
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  1. Douglas Ferguson from College of Charleston, July 6, 2010 at 2:11 p.m.

    It "might be" a deal, but new movies in my city are $6 for matinée showings and you see current releases without weeks of wait.

    Once movies have left the theaters, I'd rather rent them from Redbox for a dollar. Most of the so-called quality programming on HBO and Showtime is just quirky shock-value comedy/drama with obligatory and gratuitous nude scenes and profanity.

    Apparently it's a good business, though. There's money to be made in the decline of civilization.

  2. David Weller, July 6, 2010 at 9:13 p.m.

    Unlike pay cable in the 70's, Hulu's entering an exploding market dominated by consumer choice. Netflix, iTunes, Google TV, etc are just a few of the subscription services that compete directly, or indirectly, with Hulu Plus. The backlash over Hulu's selection, price, and decision to include ads in Plus shouldn't be taken lightly as long as consumers feel they have a wealth of competing options, and content, to choose from.

    Until Hulu Plus becomes the only way for people to watch old episodes of broadcast television (and until old episodes of broadcast television become the new must-have entertainment), Hulu's going to have work hard to win their customers.

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