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March 2019 - Streaming Media Sourcebook
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Analysts Respond to Hulu Price Drop, See the Move as Savvy
A recent price hike by Netflix could have consumers reevaluating their OTT spending. By lowering costs, Hulu helps avoid churn.

Just days after Netflix raised prices for all its plans, Hulu did the unexpected: It lowered the price of its subscription video-on-demand (SVOD) service from $7.99 to $5.99 per month, while at the same time raising the price of its virtual multichannel video program distributor (vMVPD) service from $39.99 to $44.99 per month. All changes will go into effect on February 26. (The price for Hulu's ad-free SVOD tier hasn't changed at $11.99 per month.)

Considering how rare a price drop is, the news has gotten plenty of attention. Analysts have weighed in on what Hulu hopes to achieve and whether or not this is a smart play. Speaking to CBS News, Ivan Feinseth, director of research at Tigress Financial Partners, sees this as a smart play: "It makes sense to skim some of the market that is up for grabs and come in at the lower end of pricing," he said.

Raymond James equity analyst Justin Patterson sees this move as a smart way for Hulu to remain part of consumers' personal streaming bundles as new competitors emerge: “We view Hulu’s price decrease on its basic plan as shrewd,” he wrote in a research note. “Hulu users tend to be Netflix users, and this ensures that the monthly cost of subscribing to both services unchanged at about $19 per month. Hulu also ensures pricing remains attractive in front of upcoming launches by Walt Disney and NBC, minimizing the risk of competitive pressure. At the other extreme, Hulu’s price increases to Hulu + Live TV reinforce why we are skeptical of skinny bundles—the price points are too close to linear TV.”

While Hulu's news caused a 1.4% dip for Netflix's stock, BTIG analyst Rich Greenfield doesn't see any lasting damage: “Netflix is a rocket hurtling towards Mars, while legacy media companies are bicycles with engineers that only have the ability to make more bicycles. By the time they learn to make cars, let alone rockets, Netflix will be another planet or even solar system away," he told MarketWatch.

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