Hulu could make millions on its new deal to customers offering new subscribers the commercial supported plan for $1.00 per month. You might ask, why would a company that usually charges $7.99 want to lose $7.00 per possible subscriber by offering such a deal? Because if Hulu manages to sign up lots of customers on this offer the amount of eyeballs seeing its ads will go through the roof. While people laud Netflix for its huge subscriber base, which is over 100 million subs, the company only makes money one way. Through subscriptions to their plans. And if you are an existing customer the only way Netflix can make more money off of you is to raise the price or get you to upgrade to a higher end plan. And while some people may say, get a new TV and decide to jump on a 4k level streaming plan or need more screens, the likelihood that people will just stick to what they have been doing for years is much stronger.
Hulu, unlike Netflix makes a good chunk of their money from ads shown during its programming. This makes it a lot different from Netflix and Amazon because it means that it gets that monthly subscription money and ad revenue like a TV network.
Where Hulu will get the biggest bang for its buck
It may seem like Hulu is giving away money on this deal. But there are going to be people who never considered Hulu as a service up until now who decide that the price is too good to pass up. There are going to be customers who would never sign up saying well heck what have I got to lose? Once they are in on the service Hulu will push upgrades like commercial free viewing and even more, the live TV service. Customers may not get in on either extra but those that do will then become much higher paying customers and may even spread the product by word of mouth.
Companies don’t often launch a discount because they hate making money. Amazon regularly sells its streaming products and tablets for far under their actual value because the idea is to get you to sign up for Amazon Prime once you have your Fire TV or tablet, which breeds customer loyalty and shopping on Amazon more often. Meaning Amazon makes its money later when you buy toilet paper, batteries, next years Christmas gifts etc. Some customers will even use Prime memberships to shop at Whole Foods. Amazon also makes money through things like Amazon Channels when customers sign up for services offered through the portal.
This is what Hulu is going for. If more people have Hulu and more people use Hulu it will increase the money it makes from advertisers. If a percentage of those customers then upgrades to a different tier Hulu really rakes it in. It is the kind of strategy that political operatives like to imply in close elections. Get people who never participated through the door somehow. Use that to boost the numbers, then hope it breeds loyalty by using their volunteered information to keep reaching out in the future.
I’m not saying that Hulu is a bad deal, in fact, I think anyone who wants an affordable TV solution would be crazy not to try the service out at this price. But it is necessary to provide some perspective when it comes to retail practices.