A few weeks ago, Hulu sent a proverbial shockwave through the Internet when News Corp.’s deputy chairman announced the ad-supported video site (which features current episodes of on-air shows from NBC, Fox, and ABC, among others) would look to start charging for content in 2010. In particular, the damning quote was that “Hulu needs to evolve to have a meaningful subscription model as part of its business.”
Of course, a week later–perhaps due to the backlash from viewers or simply the comments being wrong—Hulu retracted the statement, noting, “the site remains steadfastly committed to free content [and] any possible subscription or pay-per-view service…would only build upon what Hulu offers.” Sure. Maybe this is true; obviously we have no real way of knowing. But as a business model, the “free” Internet we have grown to love will someday evaporate.
As the newspaper industry continues its downward spiral, the storyline has been “print journalism is dead.” Taken over by the nefarious digital revolution, nobody wants to read a newspaper anymore. Which may be true. But why don’t I have a newspaper subscription? Because I can go to nytimes.com and get it for free. It’s not that I think The Huffington Post or Politico are bankrupting the New York Times, it’s that their own website is doing it.
And it keeps going. I don’t watch Comedy Central anymore, because I can get the Daily Show and Colbert online. The same goes for ESPN, since espn.com posts video recaps of the games. Actually, I prefer that option; I can essentially make my own Sports Center, cutting out the UFC highlights, the ads, and the Stuart Scotts. And not only does Time Magazine offer all their articles online, they actually supplement the material, with blogs by columnists and photo essays, essentially asking you not to get a subscription.
When providers first started putting content online, the assumption was that ad revenues would offset the lack of subscription. But currently, advertisers just aren’t willing to pay enough for this to work; Hulu (despite the quotes above) has often said they can’t be self-sufficient on ads, nytimes.com concurs. You simply have to look to the Internet’s golden boy, Facebook, to see the limitations of ad-based revenue; the second most trafficked website has yet to find any means of monetizing content, and subsidizes their ad revenues with private investments.
What I think content providers fail to understand is that the next generation of consumers has little attachment to how they intake their media. I’m indifferent toward choosing to watch 30 Rock on TV or online, the same goes with reading the newspaper at my kitchen table or on my laptop. Since the Internet has done a good job simulating the “real” experience, price becomes the main factor. And free is undoubtedly the best price.
Monetizing online content can work, and I think we’ll start to see a greater shift toward it. iTunes resoundingly proved that people are willing to pay full price for the digital experience. The Economist and The New Yorker, arguably the two most intelligent mainstream, weekly publications, have subscriptions in place for their websites—The Economist makes you pay for this week’s articles, The New Yorker just the archives. MLB.tv, NBA League Pass, and ESPN360 are subscription-based sites to stream live sports games. And arguably the best feature from Netflix is not the DVDs to your mailbox, but the vast archives of streaming movies and TV shows that comes bundled with a subscription.
In the end, I think we’re living in the golden age of media on the Internet. I can sit down and watch virtually any TV show, with few ads, on my computer, and read whatever publications I need, all for free. But I think this is one of those times we’ll tell our kids about fondly, not something that continues to be the status quo. Free, professional quality content can’t stay free forever, so watch it while you can.
I agree that it will be very difficult for Hulu to start charging a subscription fee because it has built its fan base and reputation based off the fact that it offers audiences free access to their favorite television shows. This sensation of Hulu, and other websites, just proves how our generation today more so than ever seems to prefer the internet version of television shows and newspapers because most often it is free and we can access it at our own time. However, since we watch television shows online and don’t actually pay attention to the 30 second advertisements, these internet sites such as Hulu are learning that they can’t just rely on advertisements anymore. The advertisement industry is suffering major losses because of inventions such as DVR, TIVO and the Internet.
Hulu cannot charge a fee unless it wants to start eliminating advertizements. The original post had it right, people don’t care how they get the content, as long as they get it. I watch Hulu because its free and easy. If i had to choose between free and difficult and not free and easy, free and difficult always wins. There will always be sites such as Megavideo and Sidereel that will have the same content. I just put up with ads for convenience sake. I will not for a fee.
I agree with the last comment. If Hulu expects to charge people, they need to remove the ads and charge a minimal fee. People can always find tv shows and movies for free, and when the convenience doesn’t outweigh the monetary cost, no one will pay.
It’s interesting to think that this might be the golden age of the internet, which really puts things into perspective. I’d like to see more figures on this, but if your assumptions are true, and that the current internet model is unsustainable–like the others have said–alternative, yet more inconvenient sites, may be on the upsurge. For me, I might just stop watching TV altogether. About the Economist and the New Yorker: I think they are extremely respectable magazines, but they have their own audiences, who are willing to pay in order to get their feed. If these magazines were free online, I might be willing to give them a try- but for now, I’ll probably settle with googlenews or read the dusty issues in my friend’s bathroom.
It’s a very interesting point because, while Hulu does bring in new revenue through advertisements, it most definitely cannibalizes the revenue brought in by viewers lost from on-air telecasts and through home distribution. The question however, is precisely how much? It may be alarming that Hulu execs brought up the subscription model, suggesting that perhaps they’ve done more harm than good to their bottom line. Maybe not paying for everything, but I think that Hulu could become an even better center for online media entertainment if they could justify putting additional special content up for a small price. There’s a lot out there that Hulu doesn’t offer on its site– and its not even available if you wanted it. But if it was there just in case you wanted to purchase those extras, would that be so bad?
I agree with all of these comments and I can’t agree with more with the comment regarding DVR and Tivo. These advancements have really begun to transform the way companies are looking at advertising as a whole and the internet seems to present a viable option to at least maintain some of their ad revenue for now. But just as print journalism is declining, so will on-line advertising, forcing a subscription model to be seriously considered, but only if consumers can see added benefits for their money. Personally, I have a DVR with my satellite subscription so I rarely watch on-line tv, but I do realize the benefits these sites have.