Home Analysis TDG: Hulu’s New Skinny OTT Cable Bundle Targets The ‘Cord-Barelys’

TDG: Hulu’s New Skinny OTT Cable Bundle Targets The ‘Cord-Barelys’

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US SVOD service Hulu, a JV which brings together Comcast’s NBCUniversal, Fox Broadcasting and Disney-ABC, caused ripples across the US TV sector earlier this month when it confirmed it was planning to expand its offering with a new OTT streaming service providing both live and on-demand programming from a number of broadcast and cable channels.

While immediately dubbed a ‘virtual MVPD’ (Multichannel Video Programming Distributor) which would throw down the gauntlet to traditional pay-TV operators, the reality is probably less dramatic, according to Joel Espelien, senior analyst at The Diffusion Group (TDG).

Hulu’s current proposition, which has nearly 12 million subscribers, is based around offering ad-supported re-runs of network TV shows the day after they air, plus VOD movies, for $7.99 a month (an ad-free version is available for $11.99).

Espelien believes the new service, for which no definite launch-date or price-point has yet been revealed, will, if anything, resemble Sling TV, an OTT-based ‘skinny cable bundle’ owned by satellite pay-TV operator Dish Network, whose core service offers a selection of major cable channels streamed live for $20 per month.

The difference, however, will be that Hulu will come at the market from an “SVOD type of perspective” with a “Netflix-type of experience,” suggests Espelien, who foresees a service that would pick up “the full schedule” from the likes of ABC, NBC and Fox (“they’re very unlikely to get CBS”), and then “throw in [content from] a Viacom, or a Scripps – something like that. So that would be your bundle.”

However, that on its own would not attract existing Hulu subscribers, declares Espelien, who thinks Hulu would also have to offer “full stacking, including current season, prior season” for every show featured, if it can negotiate the necessary rights. “There will probably be some gaps there but it will at least look like they’re trying to give you all the episodes. That’s sort of the design promise – from Day One.”

In an interview with the New York Times, Hulu’s chief executive, Mike Hopkins, made much of the fact that the service would be personalised – for instance, when turned on, it could already be streaming the subscriber’s favourite programming depending on when, where and which device it was being accessed from.

“I think what those guys have figured out is you don’t need to show me all the shows,” observes Espelien. He points out that with an existing Hulu user, they will already have relevant data, and their existing recommendation engine would be able to treat new linear content “as just a set of new shows being added to the catalogue. […] You just throw those into the same algorithm you use for everything else and give me my top shows based on what I’ve watched previously, shows that are very similar to shows that I watch heavily: it’s not rocket science at this point.”

As for the target market for the new service, Espelien dubs it ‘cord-barelys’, millenials who occupy the bottom rung of the pay-TV ladder, paying only for content they want and can afford. None of the available low-price SVOD services currently offer them what he calls the ‘tentpole’ live content they also like. “The SVOD guys don’t really do reality, whether it’s The Voice, or whatever the next show is after American Idol is over. […] So bringing that kind of content into a ‘cord-barely’ type experience, I think that’s a great opportunity for Hulu.”

Ultimately, Espelien believes Hulu is aiming for the new service to become this audience’s ‘first look’ – the first port of call for millennials switching on one of their multiple screens. “Hulu is trying to say, ‘Hey look, we could be a pretty interesting first look’. It doesn’t mean that they can be an ‘only’ look, but as a first look, if they’re able to blend those things together, and especially if they can have ESPN, so they can at least in the mind of the viewer, say ‘you know we’ve got the sports here as well as broadcast’, then they have a shot at being that first look. And the guy who becomes that first look is in a significant position.”

Such a role could allow Hulu to create partnerships with other services such as Amazon, suggests Espelien: “maybe anybody who authenticates as an Amazon user, then maybe they could see the Amazon catalogue from a Hulu search window, that kind of thing.”

What is for sure, however, is that the new Hulu service would need to be modestly-priced, says Espelien. While the press quote various sources putting the likely price-point at launch at around $40 per month, he thinks that is much too high. “If the base package is $40 then as far as I’m concerned they’ve totally missed the market. The base package needs to be $20 – and then let people add on some other stuff on top of that. But in terms of just the base level, there’s no way that Hulu could go from where they’re at today at $7.99 and suddenly be a $40 service: that would be suicide.”

As for timing, Espelien says, “It would have been great if they could have launched it in the fall. If you were going to add that content, that’s really when you should launch it, but I don’t know whether they’re going to hit that window or not.” If not, then a 2017 launch was more likely.

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