Beachfront - leaderboard - 7-1-18
  • Hulu to Offer Ad-Supported Downloading as Subscribers Pass 20 Million

    Hulu had a lot of updates at its NewFront/Upfront presentation this morning, but among the most interesting for me was that Hulu will offer downloading of its content, but with ads included. Since the vast majority of Hulu’s 20 million+ subscribers are on the ad-supported plan, this means Hulu is going to be breaking some new ground in downloading, relative to its ad-free SVOD peers Netflix and Amazon, both of which have been offering downloading for a while.

    VideoNuze readers know I’ve been a huge fan of downloading for years since TiVo first offered it, seeing it as way for time-starved viewers to gain full access to the compelling content available on SVOD or DVR when they’re either not online (e.g. in airplanes), enduring spotty carrier connections (e.g. in trains and cars) or on expensive capped mobile data plans (as most wireless subscribers still are). Since many of us are in these modes very frequently, downloading is essential for allowing us to maximize the value of our monthly subscriptions, which in turn leads to higher satisfaction and reduced churn.

    Hulu has lagged its peers by not enabling downloading, but its new feature, whose specific launch date was only identified as “during the 2018-2019 upfront season,” will differentiate itself immediately by having ads included. As we all know, Netflix and Amazon have sucked an enormous amount of ad-supported viewing hours out of the ecosystem, with downloading on these services becoming a bigger contributor. By including ads, Hulu directly addresses this, allowing advertisers to at last follow viewers into their offline viewing experiences. Hulu’s light load of ads, which are unskippable, only enhances the value proposition to advertisers.

    No details were given about how Hulu’s ad-supported download model will work. One key issue is timeliness. Obviously an ad for a movie that’s “opening this Friday” or one for a limited time sale on specific cars won’t be relevant in a downloaded show that may not be consumed until weeks later. Another issue is how ad views will be measured and reported. If an advertiser is trying to hit certain audience milestones in a time window, downloading’s unpredictable consumption is a curveball. Meanwhile, a non ad-related issue is which programs Hulu will have the rights to offer for download; for licensed content this will be much more complicated.

    Despite these challenges, downloading on Hulu is no doubt going to become a key feature of the service, as it already is for Netflix and Amazon. Another benefit for Hulu is that downloading could also add value to its Live TV service, differentiating it from other skinny bundles that don’t allow downloading of either VOD or DVR content to my knowledge.

    Stepping back, Hulu’s presentation this morning re-emphasized the unique place Hulu now has in the ecosystem. With 20 million plus subscribers, it is by far the largest online platform specializing in ad-supported premium content. It has an average age of 31 with a median income of $92K and 78% viewership on TVs. During the presentation, numerous brand executives testified to Hulu’s tech-savvy, culturally relevant audience.

    Given the rise of ad-free SVOD, more advertisers will struggle to reach their millennial audience targets with 100% brand safety and viewability, making Hulu a prime option. Hulu has also been very smart about scooping up rights to popular library content to augment its still limited (though rapidly expanding) slate of originals, led of course by “The Handmaid’s Tale” which was renewed for season 3.

    Last but not least is Hulu’s skinny bundle play with Live TV. It’s still extremely early days for skinny bundles, but Hulu’s in the unique position of leveraging its SVOD subscriber base. At $40/mo including the SVOD service, Hulu with Live TV is an incremental $32/mo if you already subscribe to SVOD. That price point is better than all other skinny bundles except Sling TV, and Hulu offers subscribers the convenience of having just one subscription.

    Today Hulu also announced it will be able to dynamically insert ads in Hulu with Live TV as well, enhancing the value of its inventory. One big to-do for Hulu is to expand coverage of local broadcast TV. While it’s up to 600 local stations carried around the U.S. it still lags YouTube TV to be fully competitive.

    All in all, Hulu has come a long way from its roots. At a recent valuation of $8.7 billion, Hulu is still a far smaller company than Netflix (but remember Netflix now has almost 70 million international subscribers and Hulu is domestic only). But Hulu has carved out a valuable place for itself in the TV industry, for both viewers and advertisers. Online video isn’t a winner take all game, and Hulu is showing it can earn a significant slice of the pie.

     
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