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Pay to Hulu? New plan isn't winning fans

Dale Roe
Hulu says the Geico gecko and other advertisements let them keep the price for their Plus service down to $9.99 a month.

Do you Hulu?

Hulu.com, a joint venture of General Electric's NBC Universal, News Corp.'s Fox Entertainment Group and Disney's ABC Inc., launched in 2008 with free episodes of programs from those broadcast networks. Many TV fans use the site to catch up on the occasional show they've missed. Fewer have become so reliant on the site that they have canceled their cable or satellite accounts and rely on Hulu and other services, such as movie- and television-streaming Netflix, to fill their viewing needs.

Hulu is convenient. New episodes appear as early as the next day following their broadcast debuts. And did I mention it's free? Arguably the only annoying aspects of Hulu are that programs are embedded with pesky ads that are impossible to skip and you pretty much have to be tethered to a computer to use it.

Last fall, rumors began to circulate that Hulu was planning to introduce a subscription service. The source of those rumors was none other than Chase Carey, News Corp.'s deputy chairman.

"I think a free model is a very difficult way to capture the value of our content," Carey says at the industry's 2009 OnScreen Media Summit. "Hulu concurs with (the notion) that it needs to evolve to have a meaningful subscription model as part of its business."

While some consumers panicked at the news, others looked at the bright side: A subscription fee would eliminate the ads, and apps for mobile phones and devices such as Apple's iPad and iPhone and game consoles from Microsoft and Sony — as well as Web-enabled televisions — would allow subscribers to watch Hulu content on their TVs or mobile devices as they saw fit.

So, it took a lot of people by surprise when the $9.99 per month Hulu Plus launched on June 29 and the ads were still there, a move that stunned industry analyst Will Richmond.

"I think it's a huge mistake," says Richmond, an industry veteran who edits and publishes Videonuze.com, a site that reports on broadband video trends. "It's discordant with consumer expectations for a paid subscription service."

Richmond notes that viewers have become accustomed to subscription services such as HBO and Netflix delivering their content commercial-free.

"I just went on (Hulu Plus) last night to try it myself for the first time, and ... right away I was greeted with a 35-second ad from Sprint, and then there are four subsequent ads, and, you know, it felt to me a lot like the Hulu.com experience, except the difference is that I'm paying $10 now." (While the experience is undeniably similar, there are differences: Hulu Plus offers more content than the free website, and its video can be viewed in high definition.)

Hulu CEO Jason Kilar defended the paid service's inclusion of advertising, writing on his blog, "For our advertisers, who allow us to keep our Hulu Plus price low with the support of ad revenue, we offer one of the world's most effective advertising platforms, with the ability to speak effectively to users across a variety of devices, anywhere they happen to be."

The rare defenders in online forums point out that they currently pay for basic cable programming that includes advertising, but Richmond doesn't buy the comparison. Those channels, he says, have always had ads and that's what separates them from premium channels such as Showtime and HBO. He also notes that many viewers time-shift their programming and skip these ads anyway, something that can't be done on Hulu Plus.

"The last point, which I think is really important, is that when you're watching TV subscribing to basic cable networks, you're getting first-run programs," Richmond says. "With Hulu (Plus), you're getting catalogued programs and prior episodes of current seasons. So there's a big difference there in ... the quality of the content that consumers are getting and what they think they should be paying for it."

At Apple's online App Store, where the Hulu Plus app for iPads and iPhones is available, the criticism is much less restrained (as of writing, the app maintained a one-and-a-half stars out of five rating based on more than 6,300 votes).

"$10 with Ads!!!" one reviewer wrote. "Shaking my head."

"Paying for ads," wrote another. "Ten a month pricey; ten a month plus ads = greed."

"Stupid!" another added. "Only an idiot will pay a monthly fee for free TV with commercials."

Others hinted (or outright claimed) that they would be turning to file-sharing sites to download the programs illegally.

The reviewers have a point. Most people already get these programs through a cable or satellite provider. Is the $10 monthly charge simply a surcharge for portability? Whom exactly is this service designed for?

"That's the fundamental question. Is there an appetite for a library of primarily broadcast network programs for $10 a month?" Richmond says. "And no one really knows the answer to that question; we'll only find out as we go along. But that's really what the bet is."

He says that when the plan is compared to the lowest-cost Netflix tier, which allows you to have one DVD out at a time and stream all the movies and television you can, the Hulu Plus service is inferior. "But that's not to say there aren't real broadcast network TV die-hards out there that will love this sort of thing," he says. (Both services stream to Apple's iPad and a variety of Internet-enabled TVs and Blu-ray players, but only Netflix currently streams to Xbox, PlayStation 3 and Wii game consoles, while only Hulu Plus streams to Apple's iPhone and iPod Touch.)

Still, the concept of cord-cutting — ditching cable or satellite and relying on services such as Hulu Plus and Netflix for your video entertainment — hasn't become any more practical with the introduction of this service, Richmond says.

First, a cord-cutting consumer would lose basic cable channels like USA, ESPN, MTV and AMC. "None of that stuff is available on Hulu Plus; none of that stuff is available on Netflix; none of that stuff is available anywhere else for free online," he says. And he points out that although there is a growing number of people who have hooked up their Xboxes and other devices to their televisions, the experience hasn't exactly been refined to the point of basic usability, much less elegance.

"Until you can really kind of replicate what the cable experience is like or the satellite experience is like in terms of grabbing a remote control, pushing a couple of buttons and watching on your big screen, I don't think there's going to be a lot of cord-cutting that's going to happen," he says.

And the introduction of Hulu Plus doesn't indicate a sea change in the television industry, either. This is no seismic indication that television providers are ready to succumb to the fact that viewers want to watch what they want, when they want, on whichever devices they choose. Richmond notes the billions of dollars wrapped up in entrenched business models, as well as the rights issues and contractual obligations that slow industry changes to a crawl.

"Nobody is motivated to do anything too disruptive because the business actually works pretty darn well for most of the players right now," he says. But Hulu itself, he says, is emblematic of the changes that are starting to happen in the marketplace. "I think we'll continue to see that sort of evolutionary change, but anybody that's expecting a revolutionary change in a very quick period of time, I think, is going to be disappointed."

Hulu Plus promises:

  • Every episode aired from the current season of top shows from ABC, NBC and FOX
  • Every episode of every season from many of TV's classic shows; select seasons from some shows. In all, Hulu Plus offers more than 120 seasons and 2,000 episodes.
  • Programs are available in high-definition, 720p.
  • Current devices supported: Personal computers meeting specifications; Apple iPhone, iPad and iPod Touch; select Samsung TVs and Blu-ray players
  • Devices supported ‘soon': Sony PlayStation 3
  • Devices supported Fall 2010: Select Samsung TVs and Blu-ray players; select Vizio TVs and Blu-ray players
  • Devices supported Early 2011: Microsoft Xbox 360
  • Hulu Plus costs $9.99 per month. For more information, visit www.hulu.com/plus.