Paying For Hulu

If you enjoy watching TV shows for free on Hulu, then today's news won't make you very happy. News Corp., one of the co-owners of the site, has confirmed the rumor that it intends to start charging fees at some point. New Corp. Chairman Rupert Murdoch is a big fan of pay-for-content experiments, so I'd imagine he's pushing for this model and eager to see it in action. At this point details are still sketchy, because they probably haven't been finalized yet. I'm not convinced that charging for Hulu is the best idea, but if it's determined to go that route, how should they do it?

Subscriptions

I think the worst idea is to force anyone who wants to use Hulu to pay a periodic subscription fee. I don't think this speaks to the function of Hulu. Most U.S. consumers who watch shows online also own televisions. So they can watch the same content that Hulu provides at no additional cost on their TVs. Hulu is a supplemental entertainment source for most users, not a primary one. Consequently, I'm not sure that many people would be willing to pay a subscription fee to watch TV shows they already have access to. For those who have digital video recorders (DVR), the likelihood of paying a subscription fee for Hulu seems even less likely.

Bundles

The other problem with a subscription fee is the mere logistics. Do you have a subscription for the entire website? For certain channels' content? For each TV series? Derek touched on this back in June when he wrote about the rumor that Hulu would start charging for access. He suggested that they sell bundles, where you could pay for some content instead of all content, presumably at a lesser price. I think that's probably on the right track. This way, consumers will only pay for what they want and probably feel like they're getting a better value.

Pay-Per-View

You could even take bundles a step further: what if you had a pay-pre-view system for specific TV show episodes? It could be kind of like iTunes, where you pay $1 for each episode. The site could then keep users' purchase histories, and they could watch their purchases on the site as many times as they like for no additional charge. This would be my favorite approach. I'm the type who only uses Hulu when I manage to miss a TV show that I meant to DVR. I'd be very willing to pay $1 to purchase a missed episode. I wouldn't consider a subscription.

So what's the best strategy -- subscription, bundles or pay-per-view? I think the right move would be to develop an infrastructure that allows for all three, depending on users' preferences. There are some people out there with no TV who might love a full subscription, others without DVR who might like bundles, and another group who just wants one-off viewing. There's no reason all of these options can't be offered simultaneously. Doing so would maximize their capture of consumer demand.

But which style do you prefer? Vote in the poll at the end of this post.

Open Questions

One looming question I see, however, is advertising. Do you still have it if you charge for viewing? I am sure that the site's owners would love this, because it would increase their profits. But this might anger users. Some people believe that if they are paying for online content, then it should be commercial-free. I think there's a certain psychology there that dictates this feeling. Sure, we pay for cable and still have to sit through commercials, but you can largely get rid of those too now with DVR -- particularly for content that isn't live, like that found on Hulu. Another possibility could be "premium" commercial-free options at a higher price. I'll be curious to how the site handles ads once the fees begin.

Finally, I wonder how other channels will respond. Not all networks have their content on Hulu. Some have their shows on their own site. Others don't have them online at all. Will the opportunity to gobble up additional fee-based revenue bring them to Hulu? I think in some cases it will and could very well expand the site's offerings. The other possibility is that some networks continue to choose to offer their content for free online. That could drive frugal internet viewers to those sites instead.