Hulu takes aim at Netflix

From February 26th, Hulu, currently the number three subscription video on demand (SVOD) service in the US, will reduce its ad-supported offering from $7.99 to $5.99. This comes one week after Netflix —currently the US SVOD leader — increased pricing for its membership plans.  Its most popular 2S plan increased from $10.99 to $12.99 per month, and its basic plan went from $7.99 to $8.99, while its premium 4S plan, which includes ultra-high-definition quality, increased from $13.99 to $15.99.

By reducing its basic subscription by 25% at the same time that Netflix is increasing its basic subscription by 12.5%, Hulu is sending out a clear message to both the digital natives and mainstream US consumers who are now seriously considering SVOD services, to become part of their monthly entertainment spend.

It’s not just pricing where Hulu now has the edge over Netflix

Firstly, Hulu has an enviable content catalogue based on a combination of preferential access to its partners’ premium content and back catalogue and a robust originals commissioning strategy. NBCU, Disney and 21stCentury Fox — soon to be majority owned by Disney — each have a 30% stake in Hulu, while Warner Media owns 10%. In 2019 Netflix will start to lose access to content licensed from partners setting up competing direct-to-consumer services such as Disney, NBCU, and Warner Media — media conglomerates which will show greater favourability towards Hulu because of their investment in the service.

Additionally, Hulu has created a partnership model for other content providers through its integration of premium content add-ons (following on from Amazon Prime’s channel functionality) with mainstream premium TV content channels STARZ, HBO, Cinemax and Showtime.

Secondly, Hulu offers live TV and catch up, which is crucial for a streaming insurgent to attract older, mainstream linear TV consumers who still have legacy preferences for TV consumption. The hefty price tag attached to the Hulu+ Live TV offering ($39.99 per month with commercials and $43.99 without) is still approximately 60% cheaper than standard pay-TV subscriptions in the US. Crucially, the live TV option enables live and recorded catch up for tier one sports games through integration with WatchESPN, Fox Sport GO, and NBC Sports. With live sports entirely lacking from Netflix’s proposition, and yet to be available (only sporadically) on Amazon, Hulu now has a clear competitive edge over its two larger streaming competitors.

Hulu’s rapid growth in 2018, when it grew 48% to reach the 25-million subscriber mark, underlines just how serious Netflix needs to take its third placed domestic SVOD rival. With the new price point increasing Hulu’s USP, Netflix now has a battle on its hands to retain its dominance in its domestic market.