Jun 29, 2010 9:00 PM by Chris Welty
LOS ANGELES (AP) - Online video site Hulu, under pressure from
its media company parents to generate a bigger profit, launched a
subscription service Tuesday with complete access to back episodes
of popular television shows.
For $9.99 a month, subscribers can get the entire current season
of "Glee," "The Office," "House" and other shows from
broadcasters ABC, Fox and NBC, as well as all the past seasons of
several series. The popular, ad-supported website will continue to
have a few recent episodes for free online.
In a surprise move, however, paying subscribers will get the
same number of ads as users of the free website.
Hulu Chief Executive Jason Kilar said keeping ads was necessary
to help keep the subscription price low.
"Certainly there was an opportunity for us to offer an ad-free
service at a higher price," Kilar told The Associated Press. "But
we heard loud and clear from consumers that they would prefer to
have a lower price in a way that advertising helps lower the
The new site is initially available by invitation only on
computers and through special applications designed for Apple
Inc.'s iPad and iPhones and certain Samsung Blu-ray players and TVs
- the first time Hulu is available off desktop and laptop
It's coming soon to Sony Corp.'s PlayStation 3 and some of its
TVs and Blu-ray players, and there are plans to launch on Microsoft
Corp.'s Xbox early next year.
"More wherever. More whenever. Than ever," the company says in
new marketing materials.
The long-awaited move should be a boon to Hulu's corporate
parents: News Corp., General Electric Co.'s NBC Universal, The Walt
Disney Co. and Providence Equity Partners.
Hulu, which launched fully to the public in March 2008, has said
that it took in more than $100 million in revenue in 2009 and has
posted a net income, the most stringent measure of profitability,
in the past two quarters. It expects a third quarter of net income
in the three months through June. Hulu would not provide specifics
on how much it earned.
Kilar also said the company will meet its forecast to exceed its
2009 revenues by some time this summer, while Hulu Plus will "be
accretive on top of the Hulu business," adding to profits and
Hulu served up 1.17 billion videos to U.S. users in May, nearly
triple the 411 million a year earlier, but remained a distant
second to YouTube owner Google Inc.'s 14.63 billion, according to
comScore Inc. Hulu also had 43.5 million U.S. visitors last month,
ranking it sixth among video sites.
While Hulu's paid section will show the same number of ads to
viewers as on the free site, it will have more content available.
In the rush to launch, Hulu cut new deals with only about half of
its 200 content partners, and for a time, not all of the free
content will be available on Hulu Plus.
Paying subscribers can also watch shows in high definition - at
up to 720p, compared with 480p for free. Hulu didn't go all the way
to 1080p, the maximum resolution for many TVs, mainly to maintain a
good viewing experience given the average consumer's broadband
Automaker Nissan Motor Co. and Anheuser-Busch InBev SA are
advertising partners for the launch.
Analysts questioned whether Hulu could gain enough paying
subscribers without launching an ad-free service.
"There'll be some pushback if there's the exact same number of
ads, free or paid," said eMarketer senior analyst David Hallerman.
Dan Rayburn, principal analyst of digital media at research firm
Frost & Sullivan, called the dual revenue model "a bit greedy"
but unavoidable to keep Hulu's media company owners happy.
"Do I think it'll be wildly successful? No," he said. "Do I
think they'll get a percentage of Hulu users to use this? Yes."