Hulu Ditches Ads, Signs Epix: Should Netflix Worry?

Hulu users received an unexpected surprise upon logging into the streaming video service Wednesday morning: a new, advertising-free subscription tier. This comes one day after the streaming giant announced a deal with Epix that will bring blockbusters like The Hunger Games to the service starting in October. These moves effectively bring Hulu more in line with its chief competitors, Netflix and Amazon, neither of which show interstitial advertising. The total cost of the commercial-free Hulu subscription is $11.99 a month, which is four dollars more than current subscribers pay.

If you want to add Showtime, that’s still extra.

In the world of streaming video, Hulu is something of an oddity. The service was started by a partnership that included both Fox and NBC, and the current ownership includes NBC, Fox, and Disney. Since these are companies that live and die based on ad revenue, it only makes sense that Hulu was launched with an ad-based revenue stream in mind.

When Hulu introduced its first paid subscription option, Hulu Plus, consumers balked at the idea of paying a subscription while still being forced to view commercials. The official support forums were filled with complaints, but the shot-callers weren’t listening, until recently.

The Seinfeld Effect

Strangely enough, Hulu’s “big get” of the summer, all nine seasons of Seinfeld, may have been the tipping point. This was the first time that the entirety of Seinfeld was available for on-demand binge watching, and it was something that Hulu’s competition didn’t have.

Unfortunately, ads were another thing Hulu’s competitors didn’t have, and Twitter exploded with complaints.

Others exhibited a common misconception about the Hulu Plus subscription model. Although the service never did away with ads in the first place, some viewers thought that maybe the cost of obtaining the rights to Seinfeld somehow forced Hulu Plus to include ads.

Finally, the top dogs at Hulu sat up and took notice. In an interview with the New York Times, Mike Hopkins, CEO of Hulu, admitted that there are two kinds of people in this world: people who don’t care about advertising, and other people who absolutely will do whatever it takes to not watch ads.

“You can split people into two categories: ad avoiders and ad acceptors. There are clearly people who just are not going to buy Hulu because there are ads. We think we can bring them back into the fold with new content and this new choice.”

How Much is a Commercial Worth?

Of course, nothing in life is free. Some outlets have reported that the new service costs a paltry four dollars a month, but that’s in comparison to the old subscription. The total cost of the new, ad-free Hulu subscription is $11.99 a month, while the old subscription is $7.99 a month.

If you’re one of those “ad acceptors” Mr. Hopkins spoke of, you can stick with the cheaper option. Hulu has branded it as the “limited commercials” subscription, but it appears to show the same amount of commercials as the old Hulu Plus.

Should Netflix Worry?

With this move, Hulu has effectively removed one of the major advantages of services like Netflix and Amazon Prime. Netlix still has more movies, and Amazon has both original content and free shipping, but Hulu’s recent deal with Epix addresses at least one of those points.

According to the Los Angeles Times, Hulu jumped on the opportunity when Netflix’s Epix distribution agreement ended. The deal will brings movies like The Hunger Games and Transformers: Age of Extinction to Hulu starting in October.

Has this move made you any more likely to subscribe to Hulu over its competition? Hulu still has the ability to stream TV shows shortly after they air, unlike Netflix or Amazon, but at $12 a month, it’s also the most expensive option out there.

[Image from Imeh Akpanudosen/Getty Images]