Hulu Drops Its Price -- Just Not Enough

Last Updated Nov 18, 2010 10:33 AM EST

Dropping the stated price at launch is one way to remind people you are, indeed, launching something. If only it were that simple for Hulu Plus, the new premium subscription service from Hulu, which dropped its monthly charge from $9.99/month to $7.99/month.

Conveniently, and not at all coincidentally, that's what Netflix (NFLX) charges for a similar service that allows members to stream TV shows and movies to their TVs (via the Wii, xBox 360, and PS3) or other devices. Hulu Plus is also a multi-platform play.

But there's a back story here that gets to two problems with this marketplace, as hot as it is. One is the difficulty of figuring out pricing for a streaming service. To the extent there is a precedent, Netflix has set it, but the two company's two $7.99/month catalogs aren't exactly the same. Hulu Plus, since it offers full seasons of more current shows (along with old ones), is deeper, while Netflix's offering -- which isn't so rich with current fare -- is broader, in part because it also includes movies. So does that mean offering less that's more relevant is worth the same amount as offering more that's a little less relevant? Hard to say.

Second, it once again shows how unwieldy Hulu's ownership structure is. AllThingsD, which has stayed on top of the pricing story better than anybody, says the reason Hulu dropped the monthly cost by only $2, instead of halving it to $4.99, was because of pressure from the TV networks. So, Hulu is left with the inability to undercut Netflix, a move warranted simply because its offering is less voluminous.

As the market figures itself out, inflexibility on price could prove extremely problematic for Hulu. (Well, at least there's still all that ad revenue.) Netflix, while still beholden to its content providers, has far fewer of those concerns. That, and a subscriber base which currently stands at about 17 million people, gives Netflix power that Hulu, frankly, doesn't have.

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