Hulu Blows Its Chance at Paid Subscriptions

Last Updated Jun 29, 2010 6:17 PM EDT

Media companies right and left want to erect pay walls so they can finally get their due, as they think of it. The Internet video industry has waited for one of the streaming services to get off the dime and finally charge. Now Hulu has started to test paid subscriptions. But the company is off to a bad start, offering consumers too little for too high a monthly fee.

The pitch that Hulu makes to its customers more TV on more devices in HD. More content translates into the full current seasons of 33 major programs and complete episodes of a few dozen other shows: "over 120 seasons and 2,000 episodes."

More devices of course includes Apple (AAPL) iOS-based devices: iPads, iPhones, and iPod touches, over and above computers. It does or will eventually also support Samsung TVs and Blu-ray players, the Sony (SNE) PlayStation 3 and Blu-ray players, Microsoft's (MSFT) Xbox 360, and VIZIO TV/Blu-ray devices.

Sounds good on the surface, but a little in to the service, and you see the flaws. HD? The resolution is only 720p, which is below the 1080p that many cable and satellite services offer. The price is $9.99 a month -- ten dollars and you still have to watch commercials, to say nothing of paying data rates to get the programming on those mobile devices. Hulu is already profitable, and as I've pointed out before, a service like Hulu or Facebook would make more money on straight subscriptions without ads. That alone might draw people in. Sorry, folks -- Hulu doesn't want to give up a dime, because it figures that people will line up and pay.

Granted, it faces some problems in structuring a paid service:
One of the main problems the original Hulu created was an increased tension between its owners and cable companies like Comcast (CMCSA), who fretted that Hulu was providing consumers with a reason to cut their cable subscriptions. Since FX, Bravo et al. are getting paid by Comcast and the like for access to their shows, it will be tricky for Hulu to bundle those into its own service as well.
The problem is easy to understand, especially as Hulu is owned by the television companies that get paid by cable. But second string HD and retaining advertising, even for consumers who pay? It's nothing but a bad rerun of old industry business models that are overdue for change.

Related: Image: Erik Sherman
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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