Hulu has finally responded to the chorus of subscribers who don’t want to put up with ads when they pay a monthly fee to stream movies and TV shows. The service today adds an $11.99-a-month ad-free option, while maintaining its $7.99 service with what it describes as “limited commercials.”
Both will offer the same programming. A few shows on the ad-free service — including New Girl, Scandal, How To Get Away With Murder, Grey’s Anatomy, and Marvel’s Agents Of S.H.I.E.L.D. — will have a 15-second pre-roll ad and a 30-second post roll. Hulu also offers a sampling of ad-supported shows for free to PCs and a subset of the mobile devices served by the paid services.
At $11.99, Hulu’s ad-free option would be more expensive than Netflix, which is ad-free at $7.99. But CEO Mike Hopkins tells me that it’s still less expensive than HBO Now at $14.99, and close to Showtime’s new online service at $10.99.
“We did a lot of research on this,” Hopkins says. “We wouldn’t have undertaken this lightly.”
Easy to see why: Hulu is co-owned by Comcast, Disney and Fox — major owners of ad-supported cable networks. They have a lot to lose if viewers become accustomed to watching shows commercial-free, especially if they also like online alternatives enough to cut the cord with cable or satellite TV.
Hopkins says that the change “is not us exiting the ad business at all.” With new efforts to target commercials to specific viewers — for a relatively high price — “we expect ad revenue to grow dramatically.”
Hulu hopes the ad-free addition and a revved up marketing campaign will attract attention following what Hopkins calls its “spree” to beef up its programming. “All along we’ve been investing in the brand, and you’ll see us investing a lot more.”
Hulu recently made exclusive carriage deals with Turner Broadcasting, FX, and AMC Networks, and a non-exclusive one with Epix. Last year it also agreed to offer shows from Discovery Communications.
At the same time, Hulu is investing in original series including Difficult People (a comedy from Amy Poehler), The Way (a drama from Jason Katims), Casual (a comedy from Jason Reitman) and 11/22/63 (a limited series from J.J. Abrams and Stephen King).
Hopkins says he can’t predict how many people will sign up for the new ad-free offering, although “we think it’s going to be big and exciting.” Hulu said in the spring that it had about 9 million subscribers; Netflix has 42 million domestic customers.
Hulu’s recent content deals prepared for the additional offering. The “vast majority” of them are based on fixed fees, as opposed to a split of ad revenues, Hopkins says.
Still, Hulu hopes to impress advertisers with what the CEO calls its “vast data base” of information about who is viewing specific shows — and its ability to target relevant sales pitches. “Are these the type of people who might be in the market for a minivan or a hybrid — or diapers?”
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