Hulu wants to drive more customers to its ad-supported streaming package — lowering the official price from $7.99 to $5.99 per month — while it’s trying to turn a profit on the live-TV bundle with a price hike.
Starting next month, Hulu With Live TV will increase by $5 per month, rising from $39.99 to $44.99 per month (a 12.5% increase). At the same time, the monthly price of Hulu’s ad-supported video-on-demand service is dropping by $2, as it seeks to grow advertising revenue. The ad-free VOD plan will remain unchanged, at $11.99 per month.
Hulu’s new pricing will go into effect beginning Feb. 26 for new subscribers. For existing subscribers, the new prices will be reflected in their next billing cycle after Feb. 26.
The changes come after Netflix last week raised U.S. streaming prices for all customers, including an 18% hike on its most popular plan, the Standard two-stream HD tier, from $10.99 to $12.99 per month. Hulu had been prepping the pricing adjustments for several months — but given the timing, the company is hoping its entry-level streaming plan looks like an even more attractive option against Netflix’s price increase.
Hulu claimed its subscriber base topped 25 million last year, with the service netting 8 million total new subs for 2018. It doesn’t spell out which plans those customers take, but a rep confirmed that the “majority” of Hulu customers are on the ad-supported VOD plan. In September 2018, Hulu touted hitting 1 million subscribers for the live-TV service.
Why is Hulu dropping the price of its most popular plan — given that it’s continuing to lose money? The joint venture lost up to $440 million in the third quarter of 2018, more than double a loss of $207 million a year earlier, according to filings by its parent companies.
At the cheaper price, Hulu has seen higher engagement and retention among subscribers. And by pricing the ad-supported tier lower than rivals like Netflix, Hulu hopes to amass an even bigger audience for its ad business: The company claimed ad revenue jumped more than 45% in 2018, to nearly $1.5 billion. In addition, Hulu has already run extensive promotions for the VOD plan with ads for $5.99 per month for the first 12 months (and even offered it for 99 cents per month over Black Friday), and is now setting that as standard price. Also note that Netflix raised the price of its entry-level Basic plan, which offers a single non-HD stream, from $7.99 to $8.99 per month.
Meanwhile, the rationale is more straightforward for the price hike for Hulu With Live TV. After an initial land-grab to sign up cost-conscious TV subscribers at the $40 price point — amid aggressive competition from the likes of Dish’s Sling TV, YouTube TV, and AT&T’s DirecTV Now — Hulu needs to make the package profitable.
Over the past year, Hulu has added nearly a dozen live TV channels to the bundle, including the CW, Discovery Channel, TLC, Animal Planet and ABC News. It now includes more than 60 channels, including local broadcast channels for ABC, CBS, NBC and Fox. CEO Randy Freer, speaking at a conference last month, claimed the company has been able to improve margins on the live TV product by 50% over the past year but he also acknowledged, “We all have to ultimately run a business that can be profitable.”
Hulu’s rejiggered pricing strategy comes ahead of a change in ownership structure: Disney is set to take over 60% control of Hulu after absorbing 20th Century Fox’s stake, with Comcast retaining its 30% stake and AT&T’s WarnerMedia holding 10%. Disney CEO Bob Iger has said he wants to expand Hulu internationally and boost investments in original content.
Hulu positioned the price changes as providing a greater range of choices to consumers. The service boasts an on-demand lineup of more than 85,000 TV episodes, more than any other U.S. streaming service, plus thousands of movies. In addition to current shows like “The Good Doctor,” “Killing Eve,” “This Is Us,” “Atlanta” and “Grown-ish,” all of Hulu’s packages include original series like “The Handmaid’s Tale,” “Marvel’s Runaways,” “Future Man” and “Castle Rock.” In addition, it has exclusive U.S. streaming rights to all seasons of TV series including “ER,” “Lost,” “King of the Hill,” “30 Rock,” “Family Guy,” “Seinfeld,” “South Park” and “Curious George.”
“Hulu is giving TV fans what they want — choice, flexibility and control — in what they watch, how they watch and what they pay for the TV plan that best suits their needs,” the company said in a statement about the price changes.