emerged from private beta earlier this month, online video hub Hulu is now lowering the price for its premium service "Hulu Plus" in an effort to lure in more users. Previously, Hulu Plus was $9.99 per month, but today it's dropping to $7.99 per month. Current customers who had been paying the higher rate will get a refund for the difference on their next billing cycle, the company says.Having just
In addition, Hulu Plus is now also available on the Roku brand of media center devices, which start at $59.99. Subscribers will also pay the new $7.99 rate if they want to stream Hulu content via Roku to their television sets.
We suspected a possible price drop when Hulu emerged from beta back at the beginning of November, saying that the service represents one of the first major experiments in alternatives to cable TV. "If $9.99/month still seems too high, then wait," we said. "It's fair to say the company is testing the waters and adjusting to meet demand - or lack thereof. Finding the pricing 'sweet spot' is undoubtedly of the utmost importance to Hulu."
The question is now, is $7.99/month the actual "sweet spot?" Or does it need to drop even further? At this point, would another price drop even work?
How Low Can It Go?
The problem with Hulu Plus, perhaps, is that it's priced low enough - whether $9.99 or $7.99 - to appeal to the group of "cord-cutters" who are ditching traditional television in favor of modern, digital alternatives like Netflix and itself, but this group isn't big enough yet to sustain a service like this.
Case in point: Nielsen just released a report on Monday which found that "cord cutting" remains a myth. The study, commissioned by the Cable & Telecommunications Association for Marketing (OK, so maybe take it with a grain of salt), found that the vast majority of Internet TV viewers (84%) say that they are still watching the same amount of traditional TV as before and have no plans to cancel their current cable subscriptions.
In other words, we said, viewers are using the Internet to supplement their traditional TV viewing, not replace it. Combine that with the fact that much of network and cable TV is available online (for free even!) to both cable subscribers and non-subscribers alike, and you can see that Hulu Plus is a tough nut to crack.
But if Hulu Plus can't figure out a business model that works, where does that leave us?
Maybe Hulu should partner with cable companies instead as a $5/month upgrade which would be added onto your monthly bill?
Hulu's Struggles are Bigger than TV
We're living in an interesting time, one where the Internet has upset the revenue streams of just about every business ever known. Traditional companies are struggling to adapt, often finding that they'll have to live with reduced profits from what they made back in their heydays. TV is apparently going the same route.
One day we may end up in a world where traditional media is completely dead - whether that's a printed paper or magazine, an optical disc holding a movie or album, a textbook for a class at school, a notepad, a piece of mail, etc. - but we're not there yet. And anyone who thinks that we're only months away from figuring it out is either overly optimistic about the rate of change or somewhat delusional about the everyday reality most of America, not mention the world, lives in.