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InContext / An inside look at the business of digital content

What Hulu’s AVOD success story tells us

April 13, 2021 | By Todd Krizelman, CEO – MediaRadar @ToddKrizelman

Streaming video has long been synonymous with Netflix. However, ad-supported services (AVOD) has started growing in share. According to Nielsen, a third of U.S. streaming households use a AVOD service today, and that viewership is only going to continue to grow this year.

Amid this growth, it’s worth looking at what successful AVODs are doing to break through the noise and succeed. Who better to learn from than Hulu, one of the original AVOD platforms? Here are some things that set Hulu apart from the pack and that other streamers should pay attention to:

Hulu’s tiered structure

Streamers that launched in 2020 bet big on gaining subscribers. So, they gave their platform away for free or in bundled deals. However, we’ll soon start to see subscribers question whether they really need every service they’re subscribed to, especially as the pandemic comes to an end.

Platforms that offer tiered options, including a much cheaper or free ad-supported version, will emerge victorious. With an ad-supported model, consumers are less likely to cut a platform when reviewing their entertainment budget. Hulu is ahead of the pack as it already has a tiered model with an ad-supported offering at a mere $5.99 per month.

They make up the revenue because CTV is very attractive to advertisers today given its popularity among consumers. Hulu has been able to take advantage of this trend with major brands. Our platform found top advertisers on Hulu during February 2021 include DraftKings, Samsung, Mercari Mobile App, Verizon, Kia, Taco Bell, T-Mobile, TurboTax, HelloFresh and Geico.

Hulu’s innovative partnerships

It’s not just the tiered model that set Hulu up for success, Hulu has also made a number of strategic and competitive partnerships to take on other streaming giants. Of note, in 2019, Disney acquired 21st Century Fox, which included the 30% stake Fox had in Hulu, giving them a 60% stake. This meant investment in original programming increased significantly.

Taking advantage of the rise in audio streaming, in 2018, Hulu and Spotify announced a bundling partnership that gave users a discounted rate to two very popular platforms. Finally, earlier this year, Hulu entered an agreement with ViacomCBS (rebranded to Paramount+) to include continued carriage in the live TV service of CBS broadcast stations. This also includes CBS Sports Network, Pop TV, Smithsonian Channel, and the CW, as well as continued distribution of Showtime as an add-on.

Hulu as a linear TV substitute

Network partnerships are key for making customers happy. One of the most critical factors of these partnerships is the turnaround time for linear television shows appearing on Hulu. This all depends on what network the show is from, and what type of subscription the customer has.

For example, Fox, ABC, ABC Family, and ABC News shows will generally be available the day after broadcast on Hulu, otherwise they are only available eight days after broadcast online. For a cord-cutting country, this is an invaluable value add. It is worth noting that this is separate from the live TV programming that the platform (which launched in May 2016). Even if the viewer doesn’t subscribe to Live TV, they will have access to new shows the day after they first air.

Content is hugely important on streaming channels. As we see other streaming services launch, it’s important to note the differences in content. For example, Netflix is known for offering the widest selection of movies. Hulu offers a larger collection of current-season TV shows and a smaller selection of movies. This means different viewership and advertisers know it. A full 60% of Hulu advertisers are not advertising on any other ad-supported OTT platforms. These stats tell us that Hulu’s advertisers are unique and that they find value in Hulu’s audience.

As the pandemic comes to an end and people head back into offices and social activities, now is the time for streamers to open an ad-supported tier, develop strong partnerships and differentiate their content offerings. Despite the change in the time spent at home coming soon, we predict that AVOD platforms like Hulu will only grow in popularity as a channel for marketers to reach engaged audiences. The lessons that Hulu can teach new streamers at this time are priceless.

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