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As Netflix Contends With More Rivals, Hulu Stands Out

As Netflix Contends With More Rivals, Hulu Stands Out


Hulu, on the other hand, has three products that may better reflect what the future of streaming will look like. It has a live-TV service that replicates a small cable bundle at $45 a month; a video-on-demand service that sells for $12 a month without ads (this one acts most like Netflix); and a streaming service with advertising that costs $6 a month.

The last one is Hulu’s most lucrative business and points to future profits. Even though it charges $6, the service generates more than $15 in revenue per subscriber each month, because of the high-cost advertising sold against those customers, according to two people familiar with the business.

That would explain why Hulu lowered the price of the ads-based service by $2 this year — and it might also explain NBCUniversal’s interest in starting its own ad-based streaming network by 2020.

Roku, the maker of streaming boxes, is also experiencing fast growth from its advertising-driven Roku channel, a free streaming app. And in January, Viacom spent $340 million for PlutoTV, another ad-based streaming provider.

Last year, Hulu took in more than $1.5 billion in advertising, a 45 percent jump from the previous year. Randy Freer, its chief executive, expects the ad market for online television to grow to $50 billion within three years.

“This uniquely positions Hulu to benefit from elite brands into the digital video ad market,” Mr. Freer said at Disney’s investor presentation last week. “Hulu does this with a viewer-first ad experience that has less commercial interruption, with ad breaks that are shorter and ads that are more relevant.”

Netflix and Hulu aren’t necessarily either-or propositions for consumers. Many people pay for both.

Reed Hastings, Netflix’s founder and chief executive, doesn’t anticipate that new competition will cut into Netflix’s business, because consumer appetite for streaming content still outpaces what’s currently available, or what will be available.



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