Hulu is exploring an ad-free option for subscribers, said the Wall Street Journal last week. The on-demand video streaming subscription service currently includes ads in both its free and premium subscription packages. Currently, subscribers of the premium package, previously called Hulu Plus, see “a modest amount of advertising during normal commercial breaks.”
According to the Wall Street Journal, Hulu will offer an ad-free option to compete with on-demand video rivals like Netflix and Amazon Prime. For now, Hulu is calling the project NOAH (No Ads Hulu). The ad-free service could be offered as early as fall, and insiders predict the price will range between $12 and $14 per month, making it the most expensive of the streaming video services.Hulu has about nine million subscribers, an increase of three million over last year. In comparison, Netflix has 65 million subscribers worldwide. Hulu is estimated to bring in $1.5 to $1.7 billion in revenue this year, compared to Netflix’s 2014 revenue of $5.5 billion, as reported by the Wall Street Journal.Insider Take:As the Wall Street Journal points out, consumers want ad-free products which is part of the reason premium subscription services like Netflix, Spotify and Pandora have been successful. If the pricing estimates for an ad-free Hulu service are accurate though, we wonder what Hulu is thinking and if they have any hope of being successful.By pricing itself above Netflix ($8.99/month) and Amazon Prime ($9.99/month), it seems like Hulu is trying to accomplish something other than conversion from its current, lower-priced package ($7.99/month) to this new, higher-priced package. Is it offering this new option from a place of competitive pressure, or are Hulu subscribers clamoring for an ad-free subscription no matter what the cost?From a subscription company perspective, we find it interesting that this information was leaked rather than officially announced. Was it truly leaked to the press, or is this a way for Hulu to “test” the market before it officially unveils its plans?We think it makes more sense to actually test the market by releasing the new, ad-free product in a specific market, similar to what Comcast is doing with its new Stream product. By doing so, Hulu could get feedback and track data directly from its subscribers to see how popular an ad-free product would be and to set an appropriate price point. This would also be a way to test how an ad-free tier would impact Hulu advertisers and the company’s bottom line.We’ll keep an eye out for Hulu news, and keep you posted as the company reveals its plans.
