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As Netflix raises prices, Hulu lowers ad-supported subscription cost

The splash screen for Hulu on TV, tablet and mobile devices. (Photo: Hulu/Handout)
The splash screen for Hulu on TV, tablet and mobile devices. (Photo: Hulu/Handout)

Hulu, the online streaming service owned by a consortium of legacy media companies, has dropped the price of its advertisement-supported subscription as rival offerings warn of impending rate hikes to cover the cost of licensing content.

This week, Hulu said it would lower the cost of its ad-supported service from $8 a month to $6 a month. Hulu has offered this rate in the past as a limited-time deal, but the company’s move this week makes that promotional price permanent going forward.

Hulu recently announced it had surpassed 25 million subscribers. While the number may pale in comparison to Netflix’s 58 million U.S.-based subscribers, it represents a year-over-year increase for Hulu of about 50 percent compared to where the company was in 2017.

Attracting new users: Hulu’s expansion of originally-licensed content, including blockbuster shows like “The Handmaid’s Tale” and the Stephen King original “11.22.63.” Hulu has also moved to quickly sign new content deals with studios and networks that bring next-day or next-week offerings of network television programs and complete series of shows like NBC’s “ER,” ABC’s “Boston Legal” and Fox’s “Married…with Children.”

“Consumers have spoken loudly about their desire for more choice and control in their TV experience,” Hulu Chief Executive Randy Freer said in a statement earlier this month. “They are seeing the enormous benefits of streaming, they’re deciding which content and brands are most important to them, and they’re choosing Hulu.”

Many customers who subscribe to Hulu are likely do so as a supplement to another streaming service like Netflix, Amazon Prime or HBO Now. Last year, Amazon announced it was raising prices of its Prime service that includes, among other things, access to its streaming video and music services. Earlier this month, Netflix said it would raise the cost of its subscription packages across the board, with its popular HD streaming offer rising to $13 a month for subscribers.

Netflix does not produce its own programming, instead licensing and distributing programming produced by other studios and branding them as “Netflix Originals.” Its library of original programming has grown larger and larger over time, attracting new users and offering a compelling reason for existing users to stick around. One consequence of licensing so much original programing is the cost eventually trickles down to the consumer — Netflix has raised subscription rates several times over the last few years to compensate for its growing library of content.

Rate hikes for Amazon are generally fueled by an increase in shipping costs for Amazon’s e-commerce store and not related to its streaming video service. Amazon, which does produce some of its original programming through Amazon Studios, largely operates Prime Instant Video at a loss.

As customers pay more, Hulu may have been concerned that some subscribers would drop Hulu in order to keep Netflix or Amazon. To help ease that pinch, Hulu was likely provoked by the other services to drop the cost of its most-affordable subscription.

But Hulu is also feeling the effect of licensing more programming: The same day the service dropped the price of its cheapest package, it raised the price of its live TV offering “Hulu with Live TV” from $40 to $45 a month, making it one of the most-expensive linear Internet services available.

It is also one of the most-robust: Hulu recently signed a deal with Discovery Networks to make those channels available on the service. Only AT&T-owned DirecTV Now has around the same number of agreements with TV network programmers as Hulu, though the latter is still missing channels from MTV Networks like Comedy Central.

The new Hulu ad-supported and Hulu with Live TV rates will go into effect next month.

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About the Author:

Matthew Keys

Matthew Keys is the publisher of The Desk and reports on the business and policy matters involving the broadcast television, streaming video and radio industries. He previously worked for Thomson Reuters, Disney-ABC, Tribune Broadcasting and McNaughton Newspapers. Matthew is based in Northern California, has won numerous awards in the field of journalism, and is a member of IRE (Investigative Reporters and Editors).