Report: Hulu Considers Offering A Pricier, Ad-Free Tier

Hulu is considering an ad-free version of its streaming service, according to a new report from The Wall St. Journal on Thursday. The service could launch as early as this fall, and would be priced around $12 to $14 per month – higher than Hulu’s ad-supported service today, which is $7.99 per month. At this price point, the service would not likely see a large number of subscribers, given that it’s nearly as much as a premium brand – like HBO NOW, for example, which is $15 per month.

But it would allow Hulu to cater to a portion of the streaming TV viewing audience which finds itself so turned off by having to watch ads, that they wouldn’t choose to subscribe to Hulu in the first place.

The WSJ report details the significance of such a strategy shift at Hulu, which is today threatened by growing consumer demand for ad-free streaming services, like Netflix. In yesterday’s earnings, for instance, Netflix reported strong subscription growth, adding 3.3 million subscribers during the quarter – nearly a doubling of its growth from a year ago. Notably, the company is still able to pick up new users in the U.S. (0.9 million were domestic subscribers), even though Netflix’s home market is the most saturated. That, combined with better-than-expected profits, sent Netflix’s stock soaring.

Netflix’s growth – as well as that of Amazon Prime Instant Video plus other over-the-top services, including HBO NOW and more recently Showtime – which is available as a Hulu add-on – has changed how people relate to television in the age of on-demand streaming. Not only has the shift impacted viewing patterns, consumers today have a number of ways to watch TV and movies without ads, too, and many now find they prefer the experience. This trend has of course worried TV industry execs, networks and advertisers, who have found some solace in Hulu’s ad-supported model, which allows them to reach a captive audience that can’t even skip or fast-forward through ads, as they could with cable TV’s DVRs.

But Hulu knows that if it rolls out an ad-free tier, it needs to do so in a way that won’t eat into its ad business too significantly, which is why it’s considering the higher price point, the report says.

With Hulu now distributing a premium brand thanks to its deal with Showtime, there is the potential for it to cater to a different demographic – those who are willing to pay more for a better, ad-free experience. It’s possible that Hulu could offer a combined package which included both an ad-free option and Showtime – something that would make the service competitive not only with Netflix and the like, but also with the newer crop of streaming services rolling out now from cable and Internet providers, such as Comcast’s Stream, Verizon’s upcoming mobile offering, or Dish’s Sling TV.