Significant changes may be in the works over at Hulu, a website for watching television shows online owned by media giants News Corp., NBC Universal and the Walt Disney Co., according to a Los Angeles Times blog post. The company may start offering Hulu users a subscription plan of $9.95 a month, dubbed Hulu Plus, as soon as May 24. But many videos will remain free — a key to Hulu’s early success.
This mix of free and paid, a business model known as “freemium,” has been popular among startups. But Hulu’s rumored plan could be freemium’s highest-profile test. Here’s how Fred Wilson, VC and principal of Union Square Ventures, who has championed the freemium model, describes it:
Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc, then offer premium priced value added services or an enhanced version of your service to your customer base.
According to people with knowledge of the plans who spoke to the Times, Hulu users would have free access to the five most recent episodes of popular shows like Glee and Saturday Night Live. However, viewing more episodes would require the subscriber to purchase the Hulu Plus package.
The move to a subscription model makes sense. While Hulu remains a popular destination for people looking to watch traditional television shows online, recent Nielsen Online data shows unique visitors have flatlined over the past year. And while such numbers fluctuate, April data shows a drop in unique visitors. Without a growing audience to offer advertisers, Hulu has little choice but to seek revenue outside of advertising dollars.
And its network backers, too, may be pushing Hulu to charge. Peter Yared, CEO of social-app developer Transpond, recently argued in VentureBeat that the company may also be receiving pressure from those owners, who have always had concerns about Hulu cannibalizing TV viewing and specifically cable subscriptions, of which they get a cut. For Hulu, it may be time to show them the money.