Hulu is cutting the price of its video streaming service.
Hulu is also raising the price of its video streaming service.
Let’s get the what out of the way:
Hulu is cutting the price of its original subscription service, which lets you watch TV shows that have already run on traditional TV networks, as well as movies and some original programming, from $8 a month to $6. Hulu is also raising the price of its live TV service, which offers a cable-TV-like package of channels, from $40 a month to $45. And it is keeping the price of its ad-free version of its basic service at $12 a month.
The why is more interesting, though it requires an occasional dash of speculation:
- Hulu is cutting the price of its most popular subscription service* at the same time that rival Netflix is introducing a price hike. That’s a pretty decent marketing hook.
- Cutting prices on its most popular service won’t help Hulu improve its losses, which went way over $1 billion in 2018. On the other hand, Hulu’s owners — Disney, 21st Century Fox, Comcast** and AT&T — don’t seem to care about Hulu’s cash burn. One good reason for that is that while they have to acknowledge Hulu’s losses to their investors, they also make hundreds of millions of dollars a year licensing their TV shows to Hulu.
- Hulu’s roster of shows is very likely to shrink in the coming years. AT&T has already said it intends to sell its stake in Hulu, and Comcast is almost certain to do the same. Not coincidentally, both companies are launching their own streaming services and will ultimately want to take the shows they license to Hulu and bundle them into their own offerings. That won’t happen right away. But when it does, a preemptive price cut may help Hulu customers feel better about what they’re getting.
- The price hike for Hulu’s live TV subscription service follows price hikes from competitors including YouTube TV and AT&T’s DirecTV Now, which both jumped by $5 a month last year. But it’s very likely that all of the companies selling “virtual” TV subscription packages are still losing money on every subscriber, even at their new rates. Which means most of them are likely to try a combination of two things over the next few years: Raising prices again (as AT&T has already said it intends to do), and/or cutting some of the programming they currently offer and replacing it with cheaper stuff — perhaps from new digital players.
* Hulu, which said it had more than 25 million subscribers at the end of 2018, has repeatedly said that the majority of its subscribers get its cheapest service.
** Comcast is an investor in Vox Media, which owns this site.
This article originally appeared on Recode.net.