Hulu drops price of pay service

Hulu aims to compete with Netflix offering

It looks like a good, old-fashioned price war is already brewing in the nascent Internet video business, as Hulu said Wednesday that it’s launching its Hulu Plus service at a price of $7.99 per month, $2 less than the company originally proposed for its subscription service.

Netflix, Hulu’s main competitor, offers its lowest-priced subscription plan at $8.99 per month, which includes one DVD and unlimited streaming. In Canada, its new streaming-only

service is offered at $7.99 per month. Meanwhile, Netflix is testing a similarly priced, streaming-only service in various regions of the U.S. right now.

“We have been the price leader on streaming-only since we launched in Canada in September,” Netflix spokesman Steve Swasey said Wednesday.

In touting the official launch of Hulu Plus in a blog post, CEO Jason Kilar did not address the decision to lower the price but did say that those subscribers who signed up for the $9.99 a month Hulu Plus subscription during its preview period would receive a refund on the price difference.

“Hulu’s stuck between a rock and a hard place on this one,” said Forrester analyst James McQuivey. “Consumers don’t understand why they should pay to get roughly the same content they can get elsewhere for free — at least until they get it on an iPad or a connected TV — yet TV studios don’t want their shows to go to the TV at bargain basement prices. So Hulu’s stuck not really satisfying either audience at this point, even with a $2 price drop.”

McQuivey added: “Until more consumers need Hulu on a connected TV or tablet PC, any price is really too much. And even though the comparison to Netflix is unfair on several levels, consumers don’t play fair. They pay for whoever gets the shows they want where and when they want. Right now that’s Netflix.”

Hulu said Hulu Plus is now available in an installed base of more than 50 million in the U.S., and that it would launch on Roku on Wednesday. PlayStation 3 owners with a network account can download Hulu Plus, the company said. Down the road, it will be available on Internet-connected Vizio, LG and Panasonic Blu-ray players and HD TV sets, TiVo DVRs, the Xbox 360 and Western Digital’s WD TV live hub media center.

“Updates to the Samsung, PlayStation 3, and Apple iPad, iPhone and iPod Touch Hulu Plus apps will be available, bringing a variety of bug fixes and feature and performance enhancements,” Kilar wrote in his post. “We’re highly encouraged by the response we’ve received to the Hulu Plus service during the preview period. Though the service has only been in preview for part of this year, Hulu Plus is already accounting for a material percentage of Hulu’s overall business. But we’re even more excited about where we plan to take the service in the months and years to come. This is just one more step in the journey to reinvent TV.”

In a rare disclosure of Hulu’s finances, Kilar said last week that he expects the service to more than double its revenues this year to $240 million.