Tuesday, November 16, 2010, 9:22 AM ET|Posted by Will RichmondA new report being released today by One Touch Intelligence has found that 4% of surveyed Hulu.com users are subscribing to Hulu Plus and that of them, 88% of them are also Netflix subscribers. The survey included 970 individuals who subscribe to both a pay-TV service and a broadband Internet service, and have streamed or downloaded at least one TV show or movie in the past month. Of the 970 individuals, 612 of them said they use the free Hulu.com service at least weekly, with 25 of them subscribing to Hulu Plus. Of the 25, 22 of them also subscribe to Netflix.
On the one hand, the 4% penetration is noteworthy, since Hulu has yet to advertise the Hulu Plus service beyond its own site. That was reflected in the relatively narrow awareness of the service, with 68% of Hulu.com users who are not subscribing to Hulu Plus saying they are either "barely" familiar with Hulu Plus or not familiar with it at all.
It's tempting to extrapolate the 4% penetration number to Hulu.com's full user base of 29.7 million (as reported by comScore just yesterday) and conclude that Hulu Plus has nearly 1.2 million subscribers, but One Touch's Stewart Schley cautioned against doing so because the sample size is too small to support that conclusion. However, even if the number was reduced by say 75%, to yield 300K Hulu Plus subscribers, that would be impressive, as it would generate about $3M/month in revenue. At the NewTeeVee Live conference last week, Hulu CEO Jason Kilar said subscriptions are "running ahead of plan," but didn't elaborate.
When looked at over the full 970 surveyed users, the 25 Hulu Plus subscribers amounts to a 2.6% penetration rate, which compares to the survey's finding that Netflix has a 44% penetration rate. The fact that such a high percentage of Hulu Plus subscribers are also Netflix subscribers can be seen as a good news/bad news story for Hulu Plus. The good news is that the services are largely complimentary (Hulu Plus's focus on broadcast TV and newer titles, with Netflix mainly on catalog), so they can work well together, and might even combine to satisfy consumers inclined toward cord-cutting. In fact, 20% of those surveyed said that if they subscribed to Hulu Plus they would consider downgrading their pay-TV packages (though less than 1% of respondents said they actually had discontinued their pay-TV service in the last year because of online video viewing).
The bad news is that for now at least, Hulu Plus is pretty boxed in for gaining additional content, whereas Netflix is expanding rapidly. With both costing $9-10/mo, Hulu Plus could start looking skimpy for subscribers comparing the value of the two. In fact that may already be happening, as the survey found 31 individuals had tried Hulu Plus, meaning that 6 had dropped the service, to yield the current 25 subscribers. That represents a 19% overall churn rate, which is high. However, it should be noted that the survey's sample size is very small and Hulu Plus is still a very new service.
It's still early days for Hulu Plus, but the numbers seem to suggest that for those actually aware of the service, it is starting to get some traction. To expand, Hulu clearly has to put some promotional muscle behind Hulu Plus to increase awareness. There have been rampant rumors that Hulu also plans to cut the monthly fee in half, to $4.99, which would surely boost subscriptions as well. To keep those subscribers on board Hulu Plus needs to expand its content availability, which is no easy feat given the competition from Netflix, TV Everywhere and even the high availability of Hulu Plus titles on the free Hulu.com site.
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Update: Today Hulu announced Hulu Plus's official debut and a $2 price cut bringing it to $7.99/mo. No detail given for why the price was cut, but presumably demand wasn't as strong as it hoped at the $9.99 price point.
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