Effective October 8, the basic, ad-supported version of Hulu will go from $5.99 a month to $6.99, while the ad-free tier rises a dollar to $12.99.
The changes, conveyed to subscribers this morning, do not affect rates for the Disney bundle or Hulu’s live TV service. It is the first update of Hulu’s pricing since an interesting combo move in early 2019, when the monthly cost of the basic tier dropped $2 to $5.99.
Advertising is an increasingly vital part of Hulu’s strategy. Having launched in 2007 — far earlier than more recent ad-supported offerings like NBCUniversal’s Peacock or WarnerMedia’s HBO Max with Ads — Hulu has made steady progress in terms of ad revenue. Total ad revenue this year is expected to top $3 billion, according to eMarketer. Broadcast ad revenue, by comparison, was $3.26 billion in 2020.
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Disney, which is now more than halfway toward its 2024 subscriber goal, has not been shy about raising prices. As Netflix has shown, scale only increases pricing leverage. The prices for Disney+ and ESPN+ have increased by a dollar in recent months. The Disney bundle also rose by $1 in March, and last December a hefty $10-a-month hike boosted the monthly price of Hulu + Live TV to $64,99.
For Hulu, one reason for the increase is Disney’s decision to add thousands of Bollywood titles and Hotstar originals to the platform. Hotstar’s stand-alone U.S. offering is slated to go dark sometime next year. Indian Premier League cricket and other sports offerings from Hotstar are shifting to ESPN+.
In its most recent fiscal quarter, which ended July 3, Disney reported almost 174 million total subscribers across Disney+, ESPN+ and Hulu. The on-demand portion of Hulu rose 22% from the year-earlier period, to 39.1 million. In December 2020, Disney set an updated goal of attaining 300 million and 350 million total streaming subscribers by 2024. The company took full operational control of Hulu in 2019 after closing a $71.3 billion deal for most assets of 21st Century Fox and then buying out Comcast’s stake in the joint venture.
In addition to original series, Hulu has been pushing into original movies. Vacation Friends last month turned in the best opening weekend of any Hulu film to date, and a sequel is on the way.
Pricing has been one of the more complex aspects to the recent streaming boom. While conventional wisdom previously held that viewers would be unlikely to pay for more than three streaming services at a time, the effects of the coronavirus pandemic disproved this assumption. As viewership continues to shift from linear to streaming and business models also continue to evolve, viewers are maintaining a healthy appetite for streaming and appear to be willing to pay for it.
As the experience of Netflix and others has shown, price increases usually are followed by a slowdown in subscriber additions. The tradeoff is usually well worth it financially in the short term and, in the long term, subscriber growth often resumes.