Thursday, May 30, 2019

Ads or Higher Prices? Most Choose Ads

About 70 percent of Hulu subscribers buy the $5.99-per-month ad-supported plan, some 30 percent taking the $11.99 ad-free version, which gives you some idea of consumer appetite for ad-supported video, when weighed against paying more money for an ad-free experience, at least under conditions when multiple subscriptions are purchased.

And though we almost-never seem to worry about it, when defraying the cost of a video subscription with advertising, consumers are, in part, “the product,” not simply the buyers of the product. With all the apparent present concern for “privacy,” it is worth remembering that “becoming the target of ads” often is the price paid for discounts on products we wish to consume.

Hulu has 28 million accounts and 82 million viewers (an average of 2.9 viewers per account). About 70 percent, or 58 million, are on the ad-supported plan, according to Peter Naylor, senior VP, head of advertising sales.

Hulu’s ad business generated almost $1.5 billion in ad revenue in 2018. Compare that to the $72 per sub (ad version) and $144 per account Hulu earns from subscription fees. If 70 percent of total revenue came from subscription fees that same year, Hulu might be making $5 billion from subscription fees.

By 2020, Hulu might be making as much as 80 percent of its revenue from subscription fees, as the percentage of subscription revenue seems to have been rising steadily over the past couple of years.


Though it is reasonable to suggest that Netflix dominance of the U.S. video streaming market is going to be challenged by Apple, Disney, Warner Media and Hulu, it also is possible to argue that Netflix now is a global brand that some other competitors (Dish, Warner Media) might be hard-pressed to match. Disney and Apple arguably will be stronger globally. Amazon might fall somewhere in between.

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