January 29, 2019
Struggling to Compete, Hulu Drops Price Point
Sometimes, the best way to win goodwill and hang on to slipping market share is to employ an old-fashioned price drop. This is especially effective when the competition just raised their rates. At least, that seems to be the thinking behind the surprise announcement that Hulu would be dropping the price of its least-expensive subscription by two bucks. Now, Hulu’s basic plan, which still includes advertisements – a point of contention for streaming customers – will only cost $6 per month, at least, as of February 26. The on-demand streaming service without ads will remain $12.
The announcement came about a week after Netflix aggravated customers by announcing yet another rate hike. Each of its subscription levels will see a one to two-dollar increase per month. Not that, other than a bit of expected grousing, Netflix believes it will see much of a drop in customers. Hulu, on the other hand, needs something to boost its place in an increasingly crowded field of streaming services. With Disney, ESPN, and other networks debuting streaming services, and upgrades to Netflix and Amazon Prime streaming, Hulu needs a competitive edge.
The company found a surprise hit with its award-winning The Handmaid’s Tale series, but the streaming service had not been able to strike that kind of gold since. Programs like Chance, The Path, The Mindy Project, and Runaways all have devoted fans, but nothing approaching the biggest numbers for Netflix’s top shows. Critics and fans are quick to point out the reasons why: quality and quantity. Netflix has Orange is the New Black, Stranger Things, GLOW, and Master of None. As well as popular mini series such as Godless and a number of popular Marvel super hero programs. Hulu has tried a couple of different Marvel shows. Runaways, while popular with fans, hasn’t achieved breakout status, and Cloak & Dagger has yet to get much traction, even among fans.
In the face of this reality, Hulu had to find a different solution. The company’s solution was to target domestic subscription growth, trying to muscle in on the growing streaming market base before the glut of new services thinned out the numbers of people willing to shell out more cash for yet another service. That focus is yielding results, with subscriptions growing, 8 million new customers in 2018, and ad revenue is increasing as well, up to nearly $1.5 billion. The price dip is clearly taking a shot at trying to convince potential customers who have been on the fence about which streaming service to buy or whether or not to add another.
It should work in the short term, but what those new customers say about Hulu will matter more in the long run. The company needs to have a solid customer retention plan in place.
-5WPR CEO Ronn Torossian