Hulu has taken some gigantic swings in the past year, making a huge splash with original and acquired series as it tries to compete with Netflix and Amazon. But the company's latest move would be its most audacious yet: dropping ads, at least for its highest-paying subscribers.
According to The Wall Street Journal, the ad-supported streaming service is considering a plan to add an advertising-free option to its service. The new subscription could launch this fall and be priced between $12 and $14 per month. That would be at least $4 more than Hulu's current $7.99 monthly subscription fee, which includes ads, although fewer of them than the free version of the site. The code name for the project is NOAH, or "No Ads Hulu."
While Hulu isn't commenting on the report, it would represent a startling about-face for a company that has boasted offering advertisers an essential toehold in the shift to streaming. Speaking to Adweek in April, Peter Naylor, svp sales, said, "I think marketers rightfully should be concerned about the amount of screen time the country is spending that there are no commercials. It's getting harder for marketers to reach their target audiences when they spend more and more time in front of screens with no ads. So we're seen as a really, really nice place to place some bets."
Yet among streaming services, Hulu, which currently has 9 million subscribers, has a lot of ground to make up as it competes with Netflix, which now has an astounding 65 million worldwide subscribers (42 million of those are in the U.S.). Last spring, Netflix accounted for 36 percent of peak download Internet traffic in North America according to Sandvine, while Hulu had 1.9 percent.
As the only one of the three major streaming sites (Netflix, Amazon and Hulu) to carry ads, Hulu's model is seen as a binge-viewing barrier by many consumers, according to a recent study about the three streaming services from consumer insights firm iModerate. Many of the survey's respondents said they found the ads unacceptable on a subscription-based streaming service.
Naylor, however, had previously downplayed the outcry over Hulu's advertising. "You might hear people say, 'I really don't like advertising,' and it's simply not true as far as I'm concerned. What people don't like is irrelevance. So if we can use data in targeting to make ads more relevant, they're better received. It's better for the viewer, and it's obviously better for the advertiser," he said in April.
Adding another subscriber tier would also complicate Hulu's recent brand tweaks. The company recently dropped the Hulu Plus moniker, which used to refer to its subscription service, in order to make "a more focused brand," CEO Mike Hopkins said at Hulu's Newfronts presentation in April. Now, the Hulu name pulls double duty, which has led to some initial brand confusion. It is unlikely that the company could add a third tier to its service (free, subscriber, and "No Ads Hulu"), without adding a qualifier to differentiate them. Given the new option's lack of ads, how about Hulu Minus?