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Hulu tempts ad avoiders

News, 04 September 2015

NEW YORK: Ad buyers appear confident that Hulu's new ad-free subscription option will not detract from the video streaming service's appeal as a premium location for brands to advertise.

Consumers wanting to avoid ads altogether will have to pay $4 above the existing $7.99-a-month premium subscription that requires viewers to watch "limited" commercials. A free, ad-supported service is also available.

"There aren't that many people in the US that are going to shell out $12 a month to avoid ads," said Kris Magel, chief investment officer at media buying firm Initiative. Rival Netflix, for example, offers an ad-free service for $7.99 a month.

"I don't believe this is going to wipe out their [Hulu's] ad business," he told the Wall Street Journal.

Hulu's own view is that people can be divided into two categories: ad avoiders and ad acceptors.

"There are clearly people who just are not going to buy Hulu because there are ads," said chief executive Mike Hopkins. "We think we can bring them back into the fold with new content and this new choice."

"We're not walking away from the ad business," he added. "We're really confident that the ad business is going to continue to grow."

Peter Naylor, svp of ad sales at Hulu, argued that he was "bringing an even more potent audience to the advertiser, because people who have chosen the limited commercial plan, all of a sudden, now they know why they're getting that plan with ads".

The new subscription option puts Hulu in more direct competition with Netflix and Amazon Prime, neither of which carry ads, and one observer suggested it was playing catch-up.

"They look like followers here," said Steve Minichini, chief executive at digital agency AboveNation Media. "I think they are very late to the game. But regardless, it's not going to erode the ad product."

Where it may have a greater effect is on cord-cutting, as an ad-free service has the potential to replace the DVR for many consumers.

Data sourced from Wall Street Journal, Advertising Week; additional content by Warc staff