Hulu's Subscription Model: The DVR Protection Act

Last Updated Apr 23, 2010 11:57 AM EDT

Rumor, though probably well-sourced, has it that Hulu will roll out a monthly subscription service as soon as next month. But it's not likely to have the effect Hulu is hoping for.

For $9.95/month, at least according to the LA Times, users will get access to the entire Hulu catalog. Those that don't pay up will have free access to the last five episodes of series that are available on Hulu. (No word on whether people will pay for some of the shorter clips, or for some of the old movies that are also featured on the site.)

So, will this be a popular option? I think not, and here's why. As Peter Kafka at AllThingsD says, "$9.95 a monthâ€"$120 a yearâ€"is an awful lot to pay for free TV." He cites the fact that it really doesn't get you that much. There are tons of great series out there that aren't on Hulu in the first place.

I'd like to add another piece to the puzzle. There's an extremely healthy overlap between DVR owners and people with broadband connections -- people who have more than one option at their disposal when it comes to watching what they want when they want it. In households with over $75,000 in annual income, broadband penetration is at 89 percent and DVR penetration is at 54 percent. Though there have been anecdotal reports of people getting rid of their cable because they can watch TV (right now, usually for free) online, the more likely scenario is that people have both a DVR and a broadband connection.

Hulu has one nice advantage over a DVR in that there's no planning involved to watch your favorite show. But when you have a DVR that you're already paying for, which lets you access virtually all TV content and requires the pushing of a couple of buttons to make that happen, that $9.95 suddenly starts to look like a lot of money. Most people will just get a little more disciplined at hitting the record button on their remote, instead of paying Hulu.

To me -- and for all we know at this point, what I'm about to say could end up being part of Hulu's plan -- a better way to go might be pay-as-you-watch for harder-to-get content, or an offer of a per-series charge that beats the price of buying old series or seasons of shows on DVD or through iTunes. Charge a much lower fee -- low enough that most people wouldn't even stop to think about it -- for episodes in Hulu's back catalog, and the dollars might start to flow. But charge people who have other options almost $10 a month? Not a chance.

Previous coverage of Hulu at BNET Media: