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Cable Technology Feature Article

April 22, 2010

Hulu to Introduce Paid Plan

By Gary Kim, Contributing Editor

Hulu (News - Alert), the popular online site for watching television shows, plans to begin testing a subscription service as soon as May 24, according to the Los Angeles Times. Market watchers who think it is inevitable online video delivery will cannibalize today's cable, TV and telco linear video businesses now will get a partial test case of demand.

Under the proposal, Hulu would continue to provide for free the five most recent episodes of shows like Fox's 'Glee,' 'ABC's 'Lost' or NBC's 'Saturday Night Live.' But viewers who want to see additional episodes would pay $9.95 a month to access a more comprehensive selection, called Hulu Plus.

Some will argue the new plan cannibalizes digitial video recorder services more than full linear video offerings. But the test should show some of the outlines of a dual-revenue approach where online video is supported partly by advertising and partly by end user fees.

Others will say the initiative also is a test of whether content owners can disintermediate current distribution partners.

Hulu ranks second only to Google (News - Alert)'s YouTube in terms of monthly video streams in the United States and is owned by News Corp., NBC Universal and the Walt Disney Co., generated more than $100 million in revenue from advertising.

But the ecosystem is changing in the 'over the air' broadcast business as well. For decades, cble operators have offered broadcast networks carriage of their cable-only networks on cable systems, in lieu of paying fees to retransmit broadcast network content.

But all that now is up for grabs as broadcasters now say their over-the-air network fare must be paid for. To the extent that networks create a 'dollar value' for their content delivered over cable, telco and satellite networks, that implies the same content must have an equivalent financial value when viewed online.

The Hulu move will not provide definitive answers, one way or the other, about the viability of direct-to-end-user online video demand. It is, on the other hand, an important test of the thesis.

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary's articles, please visit his columnist page.

Edited by Marisa Torrieri