In a sign of the turmoil engulfing the video content world, Hulu announced today that it would be shifting its ad-supported free TV-streaming product to a new Yahoo offering called Yahoo View. The new service will replicate the content currently available to non-subscription Hulu viewers, including recent episodes from ABC, NBC, and Fox.
Both Hulu and Yahoo are in the midst of changes in ownership. Last week Time Warner spent $583 million to secure a 10% stake in Hulu. In July, Verizon won a months-along auction process and agreed to acquire Yahoo’s core business for $4.83 billion.
For Hulu, transferring its advertising-based customer tier to Yahoo paves the way for focusing on its 12 million paying subscribers (Netflix boasts over 81 million). At the moment, Hulu offers two paid subscription products, $7.99 per month for viewing with commercials and $11.99 per month for ad-free video.
The announcement hints at the limitations of Hulu’s high-road approach to advertising; for example, the company only charges brands for ads played from start to finish. “Our ad model is very restrained,” says Peter Naylor, senior vice president for advertising sales. “That’s how we go to market.”
Hulu’s logic: To charge TV-level premium prices for ad spots you have to play by TV’s traditional rules. “The challenge with all these video offerings is that everyone wants to be positioned as TV replacement,” Naylor says. But “a view is not a view is not a view. Autoplay muted video in a social media feed is not the same as watching conventional television.”
As for Yahoo, its prior attempt to gain a foothold in the streaming market, called Screen, was a major bust. The company shut down the product in January, after spending north of $100 million.
With View, Yahoo is taking a different approach and hoping for a different outcome. It will rely on Hulu’s partners to produce the shows, for example. And View will link up with Tumblr, in an attempt to cultivate second-screen engagement.
“This partnership with Hulu is a natural extension of that strategy, bringing the best of TV and entertainment content to our lifestyle vertical,” Phil Lynch, who runs media partnerships for Yahoo, told Variety.
Verizon, for its part, has had mixed success in video. Live video has become an important asset for AOL, which Verizon acquired last summer for $4.4 billion. But the company is still experimenting with Go90, the mobile app it developed in-house with the aim of wooing younger viewers.
Verizon and Yahoo expect to finalize their merger, designed to give both companies a stronger position in digital advertising, by the end of the year.