A new insight about Hulu shows how Netflix has helped drive a market for ad-free TV

  • 21st Century Fox CEO James Murdoch said about half of Hulu’s subscribers pay $US4 extra to eliminate ads from the service. (Update: a Hulu source said it is actually under 40%.)
  • Still, this is a shift from late 2015, when former Hulu CEO Mike Hopkins said the “vast majority” of users chose to keep the ad-supported version.
  • This shows how Netflix and on-demand culture has influenced consumer desire to pay for ad-free TV.

For years, many TV folks who rely on advertising have privately worried that Netflix – and the on-demand, binge-watching culture that has come with it – was causing consumers to develop a disgust for ads.

On Tuesday evening at the Code Conference, we got another data point from a Hulu co-owner that suggests consumers have a desire for ad-free TV: about half of Hulu’s 20 million subscribers choose to pay extra for the ad-free version.

“It’s very popular,” 21st Century Fox CEO James Murdoch said of Hulu’s ad-free tier, which costs $US11.99 per month ($US4 more than the $US7.99 ad-supported tier). “I think it’s about even,” he said of the amount of subscribers who choose each version. (Update: a Hulu source said that under 40% actually choose the ad-free version.)

Though the figure is nebulous, it still represents a change from when Hulu introduced the ad-free tier back in 2015. At the time, former Hulu CEO Mike Hopkins positioned it as a way to give a minority of users the choice to remove ads because their complaints were “too much of a negative” for the brand.

“Almost overnight, the complaints about advertising on the limited-commercials plan plummeted,” Hopkins said in late 2015. Mission accomplished from that perspective. But Hopkins described the ad-free version as more of a niche offering from Hulu than a fundamental change. He said the “vast majority of customers” had chosen the ad-supported version, “which is what we thought would happen.”

The idea was that if you made people understand that they were choosing to save money and watch ads, they would be happier – but they would still choose ads. But there is clearly now an appetite among Hulu’s user base to pay more for an ad-free product as well, though it may not be quite as large as Murdoch initially stated.

What else has changed in that time? Netflix solidified itself as a dominant player in the TV ecosystem that wields major power and has tons of influence on how the public consumes television shows.

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