Hulu and the Failure of Subscription-Based iPad Applications

As I skimmed the iPad app store the other night, the one app that struck me most (besides Flipboard) was one that actually set way, way down at #55.  It was the highly-touted Hulu + app, possibly one of the most hoped-for and touted apps by the iPad crowd.

The price was set at $9.99.  So far, the iPad has done a phenomenal job of stretching our limits in what users are willing to spend via digital, download-driven purchases.  The $.99 standard was set years ago with the introduction of iTunes and music downloads, and for the most part, it transitioned over to the app store and became the entry-point for paid apps in the space for over three years.

There is an unspoken expectation in iTunes app land.  If you download a free app, expect/respect the fact the developers need to keep their lights on too, so banners and interstitials are going to be there.   Pay for the app?  Banners are nowhere to be seen.  Heck, one of the biggest selling points in paid apps is the absence of advertising all together.

Hulu + first erred in this area.  When the $10 monthly fee was announced, a somewhat surprised crowd at least initially surmised that pre, mid and post-rolls would be kicked to the curb.  As fans downloaded and launched the app, they were surprised to see the same ads they saw on its free desktop component laced throughout the app.  Hulu actually thought people would pay $120 a year just to be able to carry an ad-driven Hulu portal around on an iPad vs. a laptop.

Think of the easy comparison, TV.  You have your free and basic cable channels, where we expect a solid 20 minutes of advertising on the hour.  Once we pay for the HBO’s, the Starz, the Showtimes, we pay to have those commercials taken away.  Hulu, in essence, is trying to become an HBO with commercials.  In reality, it appears they are trying to model their pricing after Netflix, while neglecting to reflect their massive DVD infrastructure and mailing centers that justifies a monthly-based fee.

If Hulu was smart they would have realized the subscription-based pricing model (or lack thereof) has so far been a failure in the mobile application space.  Time, Wall Street Journal, the big publications that were once going to be saved and revolutionized on the iPad are nowhere to be seen on the top paid downloads list due to this very reason.  Why pay $240 a year for an iPad Time subscription when I can get the print one for $29?  The reason is twofold:  the tendency for companies to over-estimate how much people are willing to spend on new technologies (see Dyson bladeless fan) and failure to respect the success of the discount-based subscription print models of the last 50 years.

Nearly every application that requires a monthly (or weekly) fee to receive updated content has failed to deliver any sort of discount-based pricing tier.  In the print and magazine world, long-term subscriptions often generated discounts in excess of 70% and a large majority of their business.  In iPad land, it’s $4 or $10 a month, regardless if you are here for a month or here for three years.  The failure to reward loyalty and long-term commitments with discounts is a simple yet huge mistake that quite honestly has not been executed properly in the mobile space yet.  Until this simple “problem” can be fixed, applications that require a monthly or weekly fee will continue to be plagued with low ratings and nasty reviews.

If there was ever a “good bad problem” to have, this would honestly be it for the iPublications and Hulus of the world.  There’s a simple and proven solution out there…discount-based subscriptions and price tiers.  There’s no tech issues, no“app crashing” problems to solve (which seems to be affecting a huge amount of iPhone/iTouch apps that are running O/S 4 on 3G or 3GS right now, but I digress.)  These iPublications and video services need to realize that even in the light of sexy, new technologies, people are still going to be realistic and even cautious with how they spend their money in these spaces  Until they provide a welcoming and realistic pricing model, subscription-based applications will continue to be nothing more than the Ryan Leaf’s of the iPad app store.