“HULU” THE SUBCRIPTION MODEL & WHY IT WILL WORK

huluTM_130
Hulu is a video streaming website owned by NBC Universal, Fox, ABC and Providence Equity; that provides streaming video content of current and past TV shows as well as movies on its website hulu.com, in 360p & 480p resolutions. At this current time hulu is a free based website that provides such content on a regular basis. Hulu is  the largest streaming site, with 40 million visitors a month who are viewing 5 billion minutes of shows and clips, and that number is only going up, while TV viewership is going down” (Gizmodo). This presents a great avenue for revenue generation beyond advertising, with the possibility of having roughly 10% of that community base on subscription through a monthly basis, greatly increases its capital base. Hulu sees this as a legitimate reason for moving towards a subscription model. A sentiment echoed by News Corp Deputy Chairman Chase Carey, “I think a free model is a very difficult way to capture the value of our content. I think what we need to do is deliver that content to consumers in a way where they will appreciate the value,” Carey said. “Hulu concurs with that, it needs to evolve to have a meaningful subscription model as part of its business.” “And increase the revenue source by moving to a subscription model” (Broadcastingcbale). Now we know Hulu has been thinking about this, but how can they make it work effectively for their 40 million visitors to buy-in?

What are the basic questions Hulu needs to ask?

What kind of service does Hulu intend to provide in a subscription model?

Will advertising be supported in the subscription model?

How much support will be offer to non-subscription customers?

Will subscription content be in HD?

How soon will content be available after it has aired?

How does this favor the content provider?

How can Hulu reach a wider audience?

What is the Market look and who are the Competitors?

What will be the pricing structure?

 

Who are your Competitors?

Hulu is in an ever increasing market space that is beginning to see high levels of competition battle for online space. Which it shares with

  • YouTube: known for its user generated content. Has a large library of videos, that are now outputted in 1080p resolution
  • Netflix:  Online movie rental site that offer a movie subscription model that allows its user to rental physical DVDs as well as stream on to a laptop, computer or set-top device
  • Tv.com: Similar in respect to Hulu, owned by CBS, with content from Showtime, CW
  • Tivo/DVR: cable box service that uses a set-top box to pause and record live-TV. TiVo service allows you to setup up your recordings online and select shows you would live to view throughout a season
  • Apple TV: a setup box and service from apple that allows you to buy or rent  movies and shows, also provides content in HD

Understanding who are your competitors and their strengths is key for Hulu to form and shape a strategic move forward. In helping Hulu define itself to move into a subscription model

Differentiation of Service

Hulu needs to be clear on its differentiation between free and subscription services; detailing precisely the benefits of being a paid subscriber of Hulu and why it is a beneficial service to have. The subscription service needs to have content in a short time frame from when it airs, preferable a duration of an hour to two from the airing of the show. This effectively combats or matches TiVo service & Apple TV, but trumps TiVo & Apple TV with the ability to watch the shows anywhere through the web. The ability to have immediate access to such contents at any location provides added service that few providers as such can attain.  For the free service, set shows will be available either at a later time or date.

Hulu_Video_Player_Page

All new content should be in HD as well as older shows, as this is slowly become the unwritten industry standard with the minimum resolution of 720p. The user experience and interface for subscribers most be simple, easy to navigate and highly customizable. The user mindset should be one that Hulu is their TV on the go wherever they are.  Also the use of social networking is important in creating an online community and using existing communities such as Facebook and twitter. Having subscribers add their twitter and Facebook to their Hulu account, this affords the subscriber the ability to share their Hulu content through clips to friend and family on Facebook and Twitter. This is a great inexpensive means of advertising for Hulu, not just as a web video streaming site but as an online TV site that can be consider the true and proper evolution of TiVo and DVR. Where you are not bound by the set-top box, “if there internet, there’s Hulu, there’s TV. Whether you are on business in Japan, on vacation in the Bahamas or in South America, as long as I have an internet and my Hulu subscription I have my TV, just the way I like it with the shows I want to watch and movies available on the go.

Within the paid subscription model, advertising has to be minimal and a not a distracting factor for the viewing experience as paying customers. Increased or more advertising can be used extensively within the free model.  The idea of creating a unique experience for the customer within the paid subscription model has to be a paramount object for Hulu. To augment this, Hulu needs to use as many avenues to enhance their experience for the consumer. Hulu isn’t bound by the confines of the set-top box, so the Hulu experience needs to be available on more devices and avenues possible, such as mobile phones and videogame system.

Mobile Apps

The use of app on mobile devices is on way to enhance that experience. TV.com already does this with mobile apps on Android and the Iphone. Allowing its’ users view certain shows and watch clips of others on their mobile devices. Hulu can use apps in creating an extended user experience that is part of the Hulu viewing package. Allowing users download a free Hulu app from every major app store (Android Market place, Apple app store, Palm OS, Windows Market place, Ovi store, Zune Market place & Rim), that allows the users to log on to their Hulu subscription service, view shows from their mobile devices, Select new programming to watch and share clips with friends on other mobile devices. This helps extend the reach of Hulu and solidifying the image that Hulu is truly TV everywhere.

6a00e55225079e8834011168a00a2d970c-800wi

Social Media

Integration with social media networks such as Facebook and Twitter will help enhance the Hulu experience as well as the content it provides. Last season there was talk of cancel of the TV show Heroes by the network NBC. The show was extended for another season after the executives from NBC noticed that Heroes had a surprising high viewership only through Hulu. The online community saved Heroes for another season. Online community can help build Hulu into a social viewing experience, where users of the subscription services can share shows with friends via the site, on Facebook, Twitter also via Hulu mobile app. The ability to watch show simultaneously together and chat while watching, can help create and extensive community for the Hulu experience to grow on

facebook_logotwitter-bird-logo

Hulu in the Living Room

Hulu has another avenue to expand on its reach to consumers and ensuring success for its subscription model, is through “Software distribution”. Something Netflix had started doing through partnerships by having their online streaming software embedded in High Definition TVs, Bluray players and most recently Xbox 360, PS3 that all have online connectivity. By adopting this model, Hulu effectively frees itself from the computer and laptop and moves right into the living room.  Thus creating a Hulu set- top box experience without the need to provide one; currently there are 40 million Wii, 20 million Xbox 360’s and 18 million PS3’s. Those are potentially 78 million devices that Hulu can be dispersed through; this doesn’t take into account the increased adoption by consumers toward HDTV’s and Bluray players with internet connectivity. Hulu needs to realize at the cards are falling into place; there are several avenues to which it can expand its audience reach. The availability of Internet access across numerous devices gives Hulu the ability to reach into the living room anywhere on the planet and be easily accessible from any Internet ready device (Smart phones, Mp3 players, videogame systems, HDTV, Bluray players).

Pricing

The last and most important component in ensuring the success of a subscription model for Hulu, is defining a clear price point that is attractive to consumers. There many subscription services out there that consumers are already using, that some of its competitors provide. Netflix combines its’ online service with its DVD rental subscription that starts at $8.99. Tivo has its service that starts at $12.99, and cable companies have that subscription services for DVR for $14.99.

Hulu needs to price well within that range in order to be considered a player and an effective presence in providing online TV and entertainment. $9.99 is a good starting point for their subscription pricing model. Below is an example model chart of what I think the pricing structure should look like.

Pricing Service Type
Free Limited online access,

Current show viewable at later dates.

No HD content (480p available)

Limited access with  mobile app ( ability to watch clips $ small number of shows)

$9.99 starter Unlimited online access

All content available in HD(1080p)

Current shows available an hour after airing

Customizable home landing page

Unlimited access with mobile app

Show reminders, (via email, or through mobile app)

$14.99 sports pack Same features as starter pack

Ability to watch preselected sports programming live via Hulu service

Trial services period (1-3 months) This should be a recurring program, allowing free subscribers the ability to sign up and enjoy the starter pack service for a period of time

Besides adequate pricing, Hulu needs to extend and create new partnerships, in getting addition content from studios such as CBS, WB & CW.  Also with Hardware partners in getting Hulu software unto their devices especially videogame manufactures who have an already large installed base.

The subscription model can be very successful for Hulu and can also revolutionize the Industry, to a large degree cutting out the middle man (cable provider) to the consumer, by moving television to the internet era, with the use of social networking and mobile application. This could be the beginning of true TV on demand, the ability for me as a consumer to customize the shows I want to watch into a package that is delivered to me through very available media view source anywhere around the world.

ADENDUM

bill-comcast-logo-640x227

Comcast recent deal to acquire 51% of NBC; one of HULU’s parent companies, adds an interesting twist to HULU’s subscription push. Some rumors swirling around the recent NBC acquisition by Comcast, was of the death of HULU through the merger. Due to Comcast launch its TV Comcast TV everywhere service for its subscribers, which would be indirect competition with Hulu. I beg to differ; I see the major benefits Hulu adds to the Comcast stable as well as what that means for a subscription service. Comcast TV everywhere service is just getting off the ground with currently 5000 beta tester providing these services

• It’s free with a Comcast subscription
• You authenticate up to 3 devices through Comcast.net or Fancast.com
• Video playback on Move Networks player
• Video on Demand content, though no word on HD content
• Streaming will count against Comcast’s 250GB monthly bandwidth caps

We know Hulu already provides comparable service; Comcast now has the ability to provide that through Hulu’s technology once a subscription model is set in. Where Comcast customers do not have to pay for a hulu subscription but in essence Hulu becomes the extension of Comcast service out of the Home. In return hulu is been accessed by 30millionsubcribers of Comcast and grow it user base through them. Comcast internet subscribers can be offer a packaged deal with HULU added to their service.

HULU flow chart