Hulu’s Ad-Free Epics

Those looking for evidence that Hulu is getting ready to introduce an ad-free, premium-plus tier got a big helping of it Sunday when the streaming service announced a deal with digital movie network Epix after Netflix decided it would not renew its expiring, five-year old deal with the three-studio consortium.

The deal brings to Hulu films from Paramount, MGM and Lionsgate, including such recent hits as  “Hunger Games: Catching Fire,” “Transformers: Age of Extinction,” “Teenage Mutant Ninja Turtles,” “Star Trek: Into Darkness,” “World War Z,” and “Wolf of Wall Street,” marking a major expansion of Hulu’s movie offehulu_nocbs-1rings.

“Hulu already offers some of the best and biggest titles in television programming, but our subscribers have been asking us for more, and more recent, big movies. We
listened,” Hulu’s senior VP and head of content, Craig Erwich said in a statement. “Through this new deal with Epix, we are proud to now be able to offer a huge selection of the biggest blockbusters and premium films. This is a landmark deal for Hulu and it marks a huge expansion for our offering of premium programming.”

Added Epix CEO Mark Greenberg: “Hulu has become one of the most popular premium streaming services and Epix’s agreement is evidence of their understanding of the value that our blockbuster Hollywood films, deep library of classic film titles and original programming brings to consumers.”

What neither executive said but surely understands is that Hulu will not be competitive at offering SVOD movies if they have advertising breaks in them. There are simply too many other, ad-free options for watching those same movies, as Netflix’s chief content office Ted Sarandos pointedly noted in a blog post explaining the decision not to renew the deal with Epix.  Nor is advertising likely to be an effective monetization strategy for such “premium programming,” given what Hulu probably paid for the rights. Though terms of the deal were not disclosed, Netflix is believed to have paid Epix $1 billion over the five-year life of its deal, and with blockbuster  franchises like “Hunger Games” pulling the train it’s unlikely Epix would have taken less this time around.

The big question facing Hulu as it contemplates adding a premium-plus tier is whether simply offering its current TV content without ads is enough to persuade people to pay the $12-$14 a month it’s reportedly considering. Netflix already offers TV content without ads, after all, for $10 a month. To make a go of a premium-plus tier, Hulu will need to offer a more robust selection of premium content — like popular ad-free movies of recent vintage.

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