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Hulu’s latest iPhone app update will cost the company dearly — but it may be worth it: Hulu now allows users to sign up for its Hulu Plus subscription service right within the app, which means that Apple takes over the billing relationship for those customers. In return, Apple will get 30 percent, or $2.40, of Hulu’s monthly subscription fee of $8.
Apple first introduced the 30 percent cut back in early 2011 when it added the ability to bill for in-app subscriptions to iOS. Back then, many publishers were outraged not only about the size of the cut Apple was demanding, but also the fact that the new policy didn’t allow them to use their own billing for new iOS customers.
Protests against the fee have largely died down over the years, with developers just occasionally grumbling over what some call a “tax”; however, the in-app billing fee has also resulted in many services not using iOS apps for new customer acquisition at all, or awkward workarounds that ask users to visit a website to sign up, and then return to the app.
Netflix for example isn’t allowing new customers to sign up through its iOS apps. Spotify on the other hand makes use of in-app billing, but ends up handing down the extra costs to consumers, charging them up to $13 per month for a subscription that would only cost $10 if they had signed up on the web. Hulu isn’t doing either, but is instead charging new iOS customers the same rate as its other subscribers, effectively subsidizing these new subscriptions, to the tune of $28.80 per iOS subscriber per year.
To understand why Hulu is doing this, it’s worth considering two things: The importance of mobile for online video and Hulu’s unique business model. It’s no secret that mobile video viewing is growing rapidly, and Hulu is seeing this starting to affect its subscribers as well. The video service started out with close to no traction in mobile, and concentrated the first few years on building out its living room platforms. But more recently, it has seen significant mobile growth, to the point where 20 percent of Hulu’s video views now come from mobile.
The other thing to remember is that Hulu makes a lot of money with ads, and plenty of those ads are shown to paying subscribers. So even if the company makes less money from new iPhone subscribers, it may be able to make some of it back by showing these subscribers advertising. At the same time, Hulu also uses ads to pay for and make money with free videos, which are in turn used to get people hooked and eventually convert them into paying subscribers. That’s been working well on the web for years, and the company is now looking to also use it on mobile as well.
Hulu’s mobile apps have traditionally only been for paying subscribers, but the company recently released an updated Android app that also offers users without a subscription access to select clips and full-length episodes in an attempt to get them to sign up for more. Hulu’s new iPhone app doesn’t include free content just yet, but the in-app billing reduces an important roadblock to bring this kind of upsell to iOS devices as well.
What the app does offer, aside from in-app billing, is a complete visual refresh that trades horizontal rows of content that dominate the previous version for a more vertical, mobile-friendly approach. The app now also comes with two sidebars, one for general navigation and one as a kind of deck of all the shows you watch, redesigned show pages and more contextual approach to search. Check out some screenshots of the new app below: