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Hulu's 50% Price Slash Signals Network Desperation

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We're nearing 2011 and the major broadcast networks still haven't figured out online video. They know we use it, they know we rely on it, they know we'll ditch cable bills for it, and they know we're willing to sit through ads to get to it. But they still believe we're willing to pay monthly fees to only get part of it.

This is why Netflix is succeeding and Hulu Plus will likely undergo a 50% price cut.

Peter Kafka at All Things Digital reported that, according to his sources, the subscription fee for the streaming video service will go from $9.95 per month to $4.95.

Having launched in June, Hulu Plus hasn't clicked with subscribers for several reasons. At 10 bucks per month, it's more than the cheapest Netflix subscription but offers a much slimmer catalog. Despite the monthly fee, videos are still interrupted by ads. Content has already been deleted -- namely the first seasons of ABC's Modern Family and Fox's Glee -- because of possible conflicts with DVD sales. And although Hulu Plus is available via apps for Android and Apple mobile devices, Hulu is constantly at odds with many media devices and blocks TV access.

But overall, considering the main draw to Hulu Plus would be its back TV catalog, there's simply no need for it if Netflix has that covered -- with a much bigger selection -- and the basic Hulu site features recent episodes for free.

And it's not just Hulu that major networks are mismanaging. ABC, CBS, and NBC -- with Fox maybe following suit -- are blocking Google TV's access to its official websites which feature streaming content. Similar to how Hulu blocks access from unsupported browsers, the networks deny Google TV users from watching video from their sites -- simply because it's on a television and not a laptop.

The thought process behind this boils down to ad money. Networks gain more revenue from broadcast ads than those on the web. And with Google generating roughly $24 billion from online ads, broadcasters have no interest in handing over content without some of that change.

Gartner analyst Van Baker told Reuters, "Everybody knows the lock that Google has on Internet traffic in terms of advertising. If you take that model and you extend it to television, suddenly Google's power becomes enormous in the advertising space and the broadcasters don't like that idea."

Already on good terms with Turner Broadcasting, Google is said to be negotiating with the networks to put an access deal in place. However, networks are extremely greedy, myopic, and technophobic. Between Google TV, Apple TV, Netflix, and Boxee, there's no shortage of devices or services that broadcasters try to block or manipulate.

But that  logic doesn't hold water. Why deny a home viewer from accessing online content simply because it's a television and not a laptop? And further, why charge $5 a month for previous TV show seasons if you're going to pull them anyway?

The changeover is already underway. DVD sales are drying up and dependence on streaming video is growing. If networks are left behind the curve, it might be too late for them to catch up and survive -- as mind-boggling a concept as that is. And at that point, will anyone shed a tear?

After all, who's really going to miss Blockbuster?
POSITION:  No positions in stocks mentioned.