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Will you subscribe at half the price?  (Source: Hulu)
Rumor suggests that $9.99 price was more than most beta users were willing to pay

Networks and movie rental firms see the writing on the wall; many consumers are starting to demand streaming content rather than having to watch via conventional TV or cable service. Netflix has a very robust streaming service and the company now considers itself a streaming firm that also mails DVDs.

Hulu announced this summer that it would be bringing a subscription service to users that would allow them to access more shows and movies and watch that content on devices like web connected TVs, the iPad, and the iPhone. When Hulu first talked the service up the price for a membership was pegged at $9.99 per month. Hulu has been testing the service with some lucky users for a few months now. 

According to 
AllThingsD sources are now saying that Hulu is considering a significant reduction in the price of its streaming service. That price reduction rumor, if true, would seem to suggest that beta users are not as interested in the service at nearly $10 per month as Hulu expected. The sources cited by AllThingsD claim that Hulu is looking at a new price of $4.95 per month.

If that rumor turns out to be true, the price should make the service much more appealing to users considering that for about the same $10 the subscription Hulu service was going to cost, Netflix users can get streaming and DVDs in the mail.

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RE: I heard...
By Solandri on 10/22/2010 2:00:45 PM , Rating: 4
I feel like a lot of people are assuming $4.95/month would even come close to covering the advertising revenue. It would not, not even close. It would scare me to think how much TV watching would cost if it existed without advertising.

Total TV industry revenue in the U.S. is about $15 billion, and has been declining due to Internet growth.

The U.S. has about 310 million people. If you figure 20% of them are too young to view TV or don't watch TV, that's 248 million viewers. $15 billion over 248 million viewers is $60/yr or $5/mo in advertising revenue per person. So $4.95/mo per person sounds about right for all the free OTA programming you want.

If you do it by household (figure each household shares the same Hulu account), the U.S. has about 115 million households. That works out to $130/yr per household, or $11/mo. Basically, the old and new service fee for Hulu pretty much exactly offsets their loss in advertising revenue.

That's if the person pays for the service fee. Truth is, the Internet broke TV's stranglehold on people's free time. That's what's causing the decline in their revenue - web browsing, Facebook, online chat, online games, etc. Not piracy.

RE: I heard...
By AmbroseAthan on 10/22/2010 2:51:42 PM , Rating: 2
Truth is, the Internet broke TV's stranglehold on people's free time. That's what's causing the decline in their revenue - web browsing, Facebook, online chat, online games, etc. Not piracy.

This is partially true. That is a cause of the decline, but the primary cause has been the global recession. Companies simply do not have the advertising money they previously had, so their demand for air-time is less, causing a deflated price for the air time. As money is freed up for advertising, we will see the revenues increase again.

I do agree with your point though, if you made everyone who was TV-able pay for the service, at current rates it would cover television production, but it would be necessary to make everyone pay for it to work. I think the number of people who would be willing to pay would be much less then 80% of the population, so the cost would be higher.

And I would still end up paying on top of that for the channels that do not exist on OTA.

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