Hulu spent much of last year improving the quality of its content and striking big deals for new and acquired series like Casual, Difficult People, The Mindy Project, 11.22.63 and all nine seasons of Seinfeld. This year, the streaming service is focusing on improving the experience of watching that content, especially in the comfort of viewers' own homes.
Hulu's subscriber base has grown more than 30 percent from last year, and will reach 12 million U.S. subscribers by this month. "Hulu is TV, and the fact that 70 percent of our viewing happens in a living room environment just reinforces that idea to the market," said Peter Naylor, svp of advertising sales with Hulu.
That's why many of the company's big announcements at Wednesday morning's NewFronts event at the Theater at Madison Square Garden—hosted by Broad City stars Abbi Jacobson and Ilana Glazer—center around initiatives relating to what Naylor calls the "living room," but refer to any viewing via connected TV devices like Roku, Apple TV, PlayStation or smart TVs.
Hulu has teamed with interactive advertising company BrightLine to bring interactive advertising to connected TV devices for the first time. Havas Media will be the exclusive charter agency for the new ads, which debut on Hulu this summer. It will allow viewers to interact with the creative itself much as they would on a computer or mobile device. They can click on the ad and be taken to a site or page with details about a particular brand.
"As our chief marketing officer Jenny Wall says, 'Most people love TV; TV should love you back.' It should be a two-way conversation, and that comes down to personalization and data," said Naylor. "If an ad moves and inspires you to take action, why shouldn't you be able to take action?"
The company is also partnering with Nielsen, using its digital ad ratings to monitor OTT viewing via connected TVs for the first time. The Nielsen deal also marks the first time measurement of OTT ads will be captured across all Hulu devices. Previously, Nielsen struck agreements with individual devices like Roku or PlayStation. "Our solution is the first of its kind in that we're going to go across the entire living room environment on all platforms or all devices for a complete look on a campaign-level measurement," Naylor said.
Hulu previously used ComScore to calculate total audience measurement and is adding campaign-level ad measurement with Nielsen's digital ad ratings.
Seventy percent of Hulu's viewing now occurs on connected TVs. Just eight years ago, 100 percent of Hulu's content was viewed on desktop. That number is now at 15 percent and dropping. "Mobile-tablet is growing, but living room is growing the fastest. And that's taking share from the other two," said Naylor. "That's why all these innovations are happening in the living room, because that's where the viewing is. The easier I make it for people to buy in this space, it drives my business forward."
Hulu is teaming with market research firm Millward Brown to look for more advertising insights and tools for connected TV and will be working with Magna Global on that initiative.
On the content front, Hulu has renewed The Mindy Project for Season 5, and has picked up its Aaron Paul drama The Path for a second season. It ordered another election special from Triumph, the Insult Comic Dog, which will air on the service later this year. Robert Smigel, the voice and creator of Triumph, will return for the followup to Triumph's Election Special 2016.
The company is branching into documentary films, acquiring Ron Howard's Beatles documentary, tentatively titled The Beatles: Eight Days a Week. The film will air on Hulu this fall after its theatrical run, and will be the first title from the new Hulu Documentary Films division.
Hulu is also preparing to sell a skinny bundle of broadcast and cable channels beginning next year, targeting cord cutters. "This means our viewers will be available to enjoy live sports, news and events all in real time," said Hulu CEO Mike Hopkins at this morning's event. "We're going to fuse the best of linear television and on demand in a deeply personal experience."
Last September, Hulu launched an ad-free tier priced at $11.99 a month, which led some to question the company's long-term dedication to advertising. But at today's NewFront, Hopkins will stress that "advertising remains a cornerstone of the company, and all of the research we did prior to launching the ad-free plan proved to be true," said Naylor.
"If we had a thousand people sign up today, the vast majority would choose ads," he said. "So our advertising business and the audience we bring to market is healthy, vital and growing. As evidenced by the fact that we have moved from the Hammerstein Ballroom last year to the Theater at MSG this year, our ad business is doing well."
The ad-free tier, said Naylor, helped attract "the hard-core ad avoiders" to the service, while the subscribers for the $7.99 tier, which contains ads, "understand that advertising helps pay the way." That's also helped put advertisers at ease. "Their spending and investment in Hulu hasn't been impacted [by the new tier]," Naylor said.
Even subscribers to the ad-free tier are exposed to some brand messaging, including three integrations on Hulu's original shows that Naylor will highlight during the NewFronts presentation: Goose Island IPA is integrated with Season 2 of Casual, while Microsoft and Lexus are integrated into The Mindy Project's current season.
"We can do the new thing with IP-connected television and interactivity, while we can also do beloved, favorite places like brand integrations and working with showrunners for really high-quality stuff," said Naylor.
Hulu's other NewFronts announcements include a Live Nation virtual reality partnership. Live Nation will curate a VR concert performance series for Hulu's new VR app, which is available for the Samsung Gear VR. More details and artist information will be announced later.