Hulu goes for growth at all costs
Hulu has boosted paid-subscriber numbers 16.5% in the first four months of 2019 after dropping prices for its ad-funded product. The Disney controlled firm outlined major programming investment to double subscribers within five years and new ad formats to marketers at its NewFronts (Variety).
Key points:
- 28m total subscribers: 26.8m paid, remainder promotional
- Subs boost follows price cut to ad-funded basic service from $7.99 to $5.99 plus bundling deals via Spotify and Sprint
- Outpacing Netflix U.S. growth
- Will bankroll two new Marvel series; new Nicole Kidman series 'For nine perfect strangers'; George Clooney adaption of Catch-22; new food and comedy slates
- Launches "binge advertising experience" to serve contextual ads to binge viewers
- Caps frequency and ad slot length; enables ads when viewers press pause, plus 'surprise' sponsor formats called 'Friends with Benefits'
- "Ambition over next three years "is that half of Hulu's ad revenue will be from non-disruptive and nontraditional formats ... The centre of gravity for viewers has shifted." - Hulu head of ad sales Peter Naylor
- Operating losses: CEO expects losses to peak at $1.5bn in fiscal 2019, profitability by 2024
- Hulu currently only available in U.S., majority owner Disney planning international expansion, details under wraps
Hulu's numbers torpedo the idea that streamers won't tolerate ads. And Hulu's plan for up-ending ad loads and formats are likely to lead market behaviour, particularly with Hulu's eye on global expansion.
Disney (and Comcast, which owns 30%) have the appetite and balance sheet to fund an all out streaming war – which will play out as and when Hulu does go global.
Enabling contextual, targeted advertising to bingers could provide a massive opportunity for marketers. If Hulu can demonstrate effectiveness of its ad formats – and keep innovating, capping and decluttering, it could write a new blueprint for the broader sector.
Hulu made $1.5bn in ad revenue in 2018. eMarketer predicts it will hit $2.2bn in 2020, or almost 50% growth over two years. A global ad-funded service would dwarf those numbers.
