Sunday, March 7, 2010

Hulu and monetization: A prospective pay model

Despite what we all want, we are eventually going to have to pay to use Hulu.

Ever since the video streaming service became a major player in the television industry a few years ago, the brass at News Corp and NBC Universal have been talking about monetizing it.

But fearful of the failures that came when various newspapers toyed with pay walls, nothing has materialized yet. Even when maverick News Corp Deputy Chairman Chase Carey mentioned creating a system that involved charging users back in October, the internet rose up.

Yet with Viacom pulling its content – “The Daily Show” and “The Colbert Report” – from Hulu this past week over financial disagreements, it’s apparent that Hulu needs a plan for additional revenue streams.

Thankfully, that’s what I’m here for. Though I understand that we’re all indoctrinated with the idea that we shouldn’t have to pay for anything online – a Leichtman survey last week noted that 81 percent of users “strongly disagree” with a $10 monthly fee – there are ways we can meet Hulu in the middle.

Base subscriptions with little wiggle room and no additional content won’t work, as the Leichtman survey proves. Most people who use Hulu presumably pay for TV anyway, so making them pay additional costs for stuff they can already obtain with ease is pointless and since Netflix offers TV programs – though much later once they’ve hit DVD – as a part of their service, it would fail to differentiate Hulu.

A la carte only is a no go too, considering the iTunes store offers the pay-per-episode model already.

Thus, a tiered pay model with bundling seems like the way to go. Here’s one way it could work:

First, keep the two newest episodes free for all users for one week; this would apply to all series that have a deal with Hulu. These episodes would feature the advertising that exists now. This still drives people to the web site, gets them familiar with the interface, etc. Cost: $0

The next tier(s) would cost some money, where users could bundle series together and pay a flat fee based on the number they choose. For example, one could bundle all four NBC comedies together and get every episode from the current season in HD with only one commercial at the beginning for $20. Say someone loves “House” and “24?” Bundle those together for $10. The more bundled together, the higher the cost, with a maximum of 10 series for $50. The episodes one month after the season ends. These bundles would also include Hulu exclusive bonus features like extended episodes, commentaries and selected deleted scenes. Cost: $10-$50 per bundle.

The final tier would open up entire series libraries to the user, dating back to the very beginning. It would also offer any and all deleted scenes, commentaries and other special features from previous DVD releases and include the Hulu exclusives mentioned above.  Tier 3 would include access to canceled programs and old series not even found on DVD. Additionally, users in this tier can access Hulu via their new iPad/iPhone application, on their desktop and anywhere else. Finally, the price paid would be based on the amount of data streamed. Cost: $8/month for less than 40 hours streamed, $20/month for unlimited.

Though there are a slew of other issues that would derail this – contracts, music rights, network web sites offering stuff for free – a combination of already successful models is a good place to start. This way, casual fans don’t get the shaft and diehards can really make it worth their while.   

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