Hulu Hike Its Rates Yet Again As TV Pricing Pain Rolls On

The unwelcome news that Hulu delivered Monday in a line of fine print had the inevitability of falling asleep in front of the TV after an afternoon of yard work: Months after Google’s YouTube TV raised its monthly rate to $65, Hulu would do the same.

Hulu has yet to explain the $10 increase for its Hulu + Live TV service that will hit current and new subscribers Dec. 18—neither its press releases nor its Twitter feed have noted it, and the company did not respond to a request for comment emailed Monday afternoon. 

But the Disney-owned streaming service faces the same market forces as every other video app attempting to offer a full-spectrum set of channels competitive cable and satellite TV bundles.

“First, most vMVPDs [virtual multichannel video programming distributors] were initially focused on customer acquisition, and in general launched with what were probably unsustainably low prices,” emailed Tammy Parker, a senior analyst with GlobalData. “Then, as they’ve bulked up their channel lineups, that has led to increased programming costs, which they are passing down to viewers.” 

And now these services want to make money instead of just pad their subscriber growth: “That entails price increases.” 

Meanwhile, the cost to produce the underlying content—in most cases, the property of outside companies—continues to increase.

“While technology can provide some efficiencies, the cost to create content typically increases over time,” emailed Brett Sappington, a vice president at the market-research firm Interpret. “For any successful series, the actors and directors will always want to be paid more for Season 2, not less.”

The evidence to date suggests that Hulu may not feel much hurt from this increase. The Leichtman Research Group’s latest summary of subscriber data, released Tuesday, show streaming services continuing to gain customers at the expense of cable and satellite—the top vMVPDs racked up another 1,035 million subscribers in the third quarter of 2020 while the top satellite, cable and phone-based TV services combined to lose 1.155 million.

With 4.1 million subscribers, Hulu is not only the biggest provider of streaming pay TV but now outranks Verizon, Cox and Altice’s traditional pay-TV subscriber bases. Observed Parker: “It has the market power to price its services at a premium, or least put them on par with its nearest competitor, which is YouTube TV.” 

But the trend here can only dismay Hulu subscribers. The service that debuted at $39.99 a month in May of 2017 will soon cost 65% more. And that’s happening after Hulu eroded much of its utility for sports fans in October by dropping 19 Fox regional sports networks owned by Sinclair Broadcast Group, including “RSNs” carrying the Chicago Cubs and New York Yankees. 

Inflation-weary customers may have to accept complexity as the cost of cheaper video costs. 

Sling TV starts at just $30 a month but excludes local channels and most regional sports networks, You can replace the former with free over-the-air reception (Sling’s Air TV tuners can keep that a single-remote proposition), but the latter seem out of the picture for good.

T-Mobile’s new TVision starts at just $10 for a TVision Vibe set of lifestyle channels devoid of local stations and even ESPN, and which may violate T-Mobile’s agreements with Discovery and other entertainment firms. Its TVision Live bundles start at $40 but don’t include CBS locals and miss many regional sports networks. 

Those RSNs remain one of the most problematic parts of the equation, since so many are now available on only one streaming service: AT&T TV Now, in the form of its $80 tier. 

And while many other entertainment sources are moving to go direct to customer—from PBS offering free Web streaming to the entertainment conglomerates looking to launch plus-named services that follow the Disney+ template—sports leagues seem hesitant. 

“For popular sports like the NFL, NBA, MLB, or college football, broadcast and cable networks will remain the viewing destination for many years to come,” said Sappington. “They pay handsomely for broadcast rights and their agreements last for multiple years.”

For example, a recent survey MLB.tv sent to subscribers asked about their willingness to pay from $12.50 to $30 a month for a service that, like today’s baseball video service, would still not include live broadcasts of games involving nearby teams. My response: no deal. 

“Until leagues are willing to risk moving to direct-to-consumer services or streaming players like Amazon, Apple, or Hulu decide to pony up for broadcast rights, the status quo for sports broadcasts won’t change,” Sappington said. 

And neither, it seems, will the status quo of regular rate increases.