Hulu sells an ad-free version of its streaming service, just like Netflix. But the majority of Hulu subscribers are on the $5.99-per-month ad-supported plan, which is half the price of the $11.99 no-commercials version.
Hulu has previously disclosed subscriber numbers — announcing 28 million customer accounts earlier this month — but hasn’t broken those out by plan type.
Now Hulu, which in the past month became fully ensconced under Disney’s wing, has provided some context around the size of its audience base. Overall, it has 82 million viewers (meaning there’s an average of 2.9 viewers per Hulu account). And of those, about 70%, or 58 million, are on the ad-supported plan, according to Peter Naylor, senior VP, head of advertising sales, citing comScore estimates.
Hulu’s ad business is a significant source of revenue, generating almost $1.5 billion in ad revenue in 2018. To that end, Hulu strives to make the way it presents advertising is viewer-friendly — otherwise it risks pushing those subscribers to the zero-advertising tier or losing them altogether, said Naylor, speaking Wednesday at VideoNuze’s Video Advertising Summit in New York.
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“We have to restrain ourselves. You can’t just jam ads because you need to make a number,” Naylor said. “We want to have an experience for viewers that is consistent.”
There will always be “ad-avoiders,” but the majority of consumers have some level of ad acceptance, according to Naylor.
As part of the goal of not irritating viewers, Hulu now caps the length of all ad breaks at 90 seconds (and in some cases less). It has long shown how much time is left in an ad pod with a countdown clock in the corner. “We want to be viewer-first,” Naylor said. “You don’t put ads where people don’t expect them.”
Even so, a 90-second ad break is “still an intrusive model,” Naylor said, and Hulu has been experimenting with less intrusive models. After research showed Hulu users pause content 1 billion times per month, it began running “pause ads” on screens with select advertisers.
Now Hulu is planning to introduce an ad product tailored to binge-watchers with contextually relevant messages; per Naylor, 50% of Hulu users engage in bingeing, defined at watching three or more episodes in one session. For example, that might be a spot from delivery service DoorDash saying “We know you’re bingeing – how about you get some food?”
Another idea Hulu is pitching: Sponsors could tell viewers who have watched two consecutive episodes of a show that it will be brought to them without additional ads if they a 90-second commercial. Hulu’s thesis is that these formats are “pretty much welcome in light of the fact that most experiences are truly interruptive,” said Naylor.
Asked whether Netflix or Amazon Prime Video might move to introduce ad-supported tiers like Hulu, Naylor allowed that it’s a possibility. If ad-free subscription VOD platforms decide to jump into the ad business, they would likely have lighter ad loads than TV and “informed targeting,” ultimately accelerating the long, slow decline of traditional television advertising, he said.
“Conventional TV has hit its ceiling, and that ceiling is coming down,” Naylor said. Video services that are growing are “the ones that look like TV but are better.”
On the subject of Disney’s recent deal with Comcast giving the Mouse House full control — and eventually full ownership — of Hulu, Naylor said being under one owner “will help us move faster.” Disney CEO Bob Iger has said the media conglomerate intends to invest more in Hulu’s content and expand into international markets.
Down the road, Hulu may be available in new bundle options, similar to Hulu’s deal with Spotify. Disney has said it’s likely that it will eventually bundle Hulu, Disney Plus, and ESPN Plus together in some fashion.
Currently, Hulu offers an on-demand lineup with some 85,000 TV episodes and movies. In addition to licensed content, Naylor called out Hulu original series, including season 3 of “The Handmaid’s Tale” (which premieres June 5), Aidy Bryant’s “Shrill,” and George Clooney’s “Catch-22.” Upcoming projects include “Little Fires Everywhere,” starring and co-executive producers by Reese Witherspoon and Kerry Washington, and “Wu-Tang: An American Saga,” a fictionalized history of the rise of the hip-hop group from Brian Grazer and Wu-Tang Clan’s RZA.