Question for the Week of July 8-14: Hulu Plus Ads?

First, a brief scheduling note: the last two weeks been incredibly busy, full of events I've been happy and honored to attend, as well as a wealth of problems on the home front.

I can hardly finish my indie movie reviews when my fridge shuts down during these sweltering Summer days, much less during an ant infestation. With everything cleared up now, expect the next review (The Startup Kids) to go up over the weekend. As with all my Reviewing with Others entries, I will post a link to the appropriate page on the Man, I Love Films site.

Also, I have a few typos that I have to fix from the last 2-3 enties, but I have to juggle a friend's request to take pictures for her, a few more screeners, and preparing some of those reviews. These minor typos will be gone shortly.

And we're moving on...

Why did Hulu do something as dangerously annoying as putting ads in its pay service?

Before I moved in to my new digs, I hadn't used Hulu Plus since I wrote about testing out the trial 2 & 1/2 years ago. I've had occasion to check it out now - as an Xbox app, of all the things - and I must state that I'm impressed with how the service has grown in that time.

However, like the person who asked this week's Question, I was taken aback that Hulu Plus comes with ads, just like the free service! Now, it's worth noting that the ads seem generally shorter than for the free service, but they are still ads. Who wants their paid-for movies and TV shows getting interrupted so we can learn about all the things that we don't want to buy?

As sometimes happens, this question is relatively easy for me to answer. In short: it must be partly down to the demands of the various companies that let Hulu air its material, and partly down to the fact that so many people use Hulu as to make it impossible to generate much revenue from the segment of people that pay for better service. Use of that site is so common that they have to do this.

Suppose that 50,000 people go to Hulu in the US each day (I'm low-balling here). The majority probably don't even sign in to a free account, thus allowing the site to track their data and sell this information along. Of those, I'd ballpark that maybe 400, 1000 tops, actually pay for the service. So you've got $8000 in paying customers, and 49,000 people who are using Hulu for free. Given that the company must pay for its operations bandwidth usage (ignoring sundry other costs), it's clearly a losing situation.

But the ad sponsors? Those folks do pay, and the more ads they make people watch, the more money that rolls in to Hulu's coffers. Broadcast TV seems free, but it never is - you pay for them first by buoying a show's viewership and ratings, then you pay a second time by sitting through those advertisements.

This is all without factoring for the fact that TV networks - the ultimate owners of the intellectual properties that you want to experience - are cheek-by-jowl with their sponsors. So when the networks give permission for Hulu to carry their shows, they're in a strong position to make ad-related demands. Remember, a lot of these networks and studios, like Disney, own Hulu together. They know the model they're used to (broadcast TV) and they know which side their bread is buttered on: the side that generates ad revenue.

It's pretty simple math, though it is frustrating and initially-confounding. No sooner had I wondered about this inside my own head (and heard my friends do the same), than the answer came to me. I figure the only way they could do otherwise would be to (a) severely limit the free service, (b) drastically raise the cost of the pay service (which would be a hard sell), or simply (c) force everyone to sit through advertisements, and maybe make the torture a little less harsh on the people who actually shell out their hard-earned dollars. Plan C may not be satisfying, but it's better than the first two...