The launch of Hulu Plus earlier this week has many people rethinking the business models for paid video content on the web and what their effect will be on other businesses. Some see Hulu Plus as a potential Netflix killer, or even a cable killer. But the business that Hulu Plus is most likely to destroy, at least in the near term, is the market for full-season collections of TV shows on DVD.
Consider “Lost”: The sixth and final season of the popular ABC TV show is available for pre-order on Amazon.com today for $38.99, and the “Complete Collection” DVD package is selling for a (heavily discounted) price of $148.99. So a fan could pay that price and be able to watch the series whenever he or she wanted on a TV or PC. Or they could pay $10 a month to Hulu Plus for access to the same content on a PC, iPad, iPhone and TV through Samsung TVs, or Blu-ray players and other CE devices coming soon.
Just as there are fans who still buy CDs — and in some cases LPs — to have the physical media and accompanying liner notes, there will always be hardcore fans that want the extras that come with packaged DVDs. (The “Lost” Complete Collection comes with a ton of collectible goodies, such as the “Senet” game characters played in Season 6, an island replica, a full episode guide and a black light.) But there are even more consumers who don’t need additional memorabilia from a certain TV show and would be just as happy with access to the show media alone.
This was the big bet that Apple made with its iTunes music store, and it’s finally paying off — digital sales of music in the U.S. are expected to eclipse CD sales by the end of this year. Due to the popularity of the iPod and iPhone, and the ease of being able to take a wide range of music on the go, consumers went with convenience and price as the main reasons for switching to digital downloads of their music.
In a similar way, digital access to movies and TV shows may soon eclipse sales of DVDs and other packaged media, particularly as consumers are able to access that content directly on TVs, Blu-ray players and mobile devices. While the electronic sell-through market has been slow to fully develop, Netflix has built a robust business around subscription-based pricing for streaming video services — a business that has rapidly expanded since becoming available on more consumer electronics devices.
In many cases, Netflix doesn’t have access to the latest episodes or full seasons that Hulu Plus does, meaning it has had little impact on DVD sales for full TV seasons so far. But with a full slate of nearly all popular broadcast TV programs, Hulu Plus seems poised to nip away at the incremental revenues that shows like “Lost,” “The Office,” “24″ and others make through DVDs.
Related content on GigaOM Pro: ESPN Leads the Way Over the Top, But Will Others Follow? (subscription required)