Despite the draw to ad-free services like Disney+ and Netflix, Hulu’s ad-supported plan continues to be the top choice among Hulu customers.
During Disney’s Q1 2021 call, a question was posed to CFO Christine McCarthy about Hulu’s split of ad-supported versus ad-free subscribers. McCarthy mentioned that the majority of subscribers choose the ad-supported plan, mirroring statements made almost 18 months ago by former Hulu CEO Randy Freer. “About 60% still come on board for the ads service,” Freer said in an interview in May 2019.
McCarthy echoed those statements and added that she’s quite alright with the track record of ad-supported Hulu users being the majority. “We’re very comfortable,” McCarthy said, “we like the mix that we have. We have seen the really nice growth of our addressable advertising…and enjoy that relative increase of advertising.”
In fact, Hulu makes more money on their ad-supported tier, than their ad-free one. It’s one of the reasons they dropped the price from $7.99 to $5.99 in February 2019.
However, Disney recently launched the Disney Bundle with Hulu (Ad-Free) for $6 more than the bundle with the ad-supported plan.
This mirrors the growing trend of streaming consumers choosing the “middle option” so to speak — when given the option between an ad-free plan, or a slightly less expensive one with ads.
It was recently revealed that just 4% of users subscribe to Peacock’s $9.99/month ad-free package, with many choosing to use the free service or the $4.99/month ad-supported package.
CBS All Access, soon to be Paramount+, features dual pricing as well — a $5.99 ad-supported option and a $9.99 ad-free option – with most choosing the ad-supported plan. Even HBO Max will be launching an ad-supported tier in 2021.
AVOD services like Tubi and Pluto TV have also seen an uptick in total viewership, showing that, as long as the price is right (in those cases - free), consumers are willing to sit through ads.
Granted, the most popular streaming service, Netflix, totally eschew commercials — but would consumers prefer an ad-supported version to save? While Netflix says “never,” and it’s very unlikely when its the customer’s primary streaming service. Given the amount of time customers spend on Netflix a month, there probably isn’t a big enough discount Netflix could give to make it worth it for them – and the customer.