A Brief Intro…

I started this three-part series with a discussion of “the new creativity” and asked if the freemium business model would be better for video content sites like Hulu. Then, I outlined 7 ways Hulu could benefit from a freemium model.

And finally, after all of this persuasive writing, I’d like to examine how a few boneheaded marketers will probably f*ck up the whole “free video content” thing for everyone.

Intrigued? I thought so. Let’s get into it.

They’ll Never Pay For It. Until They Do.

In my last post, I outlined a plan where Hulu could profit by packaging some already- (or mostly-) existing assets into an awesome premium package some viewers would gladly pay for.

Hulu would be happy because they’d be making money. Their free audience would be happy because they’d still get great shows for zilch. And their premium audience would be happy because they’d get a bunch of perks and cool stuff for a nominal fee.

You’d think everyone would be happy, right?

Peter Verna, senior analyst with eMarketer is pessimistic that these perks could be bundled together into a premium package. He was quoted in a November OMMA article, “Trim Marks“:

“It’s fair to say that consumers are generally not willing to pay directly for online video…

I also think that if Hulu and YouTube are going to start charging for some of their content, they should limit it to feature films. Virtually everything else they offer seems to work better in an ad-supported context, with the caveat that user-generated clips are challenging to monetize through any model.”

True, most of the examples in “Trim Marks” were from digital studios creating original content. But comments like Verna’s certainly apply to sites like Hulu and the lessons ought to be applied to any website specializing in video content. The history of online video over the past 10 years or so would support his notion that people generally won’t pay for online content.

My point is that premium customers aren’t paying for online video. They’re paying for more flexibility. They’re paying for the ability to suggest shows or brag to their friends. They are paying for a better user experience.

A Lonely Voice Crying Out From The Wilderness

Of course, not all agencies are going to challenge their clients to try new business models. Many are happy to pretend the world isn’t changing.

In that same OMMA article, John McCarus, VP and director of brand content at Third Act, said “We have made an investment in this and we are doing everything we can to connect the stars in the content-creation community with clients that understand the space and have an appetite.”

OK, that’s McCarus’ idea, but will this sit well with content creators? Isn’t this the definition of selling out? If online trust is built through honesty, sincerity, and reputation, I don’t see how this will work long-term. Sure, one-offs will flock to it, but creators looking to connect will likely shy away from this business model.

But the suits go ever further! Studios need to “make room for advertisers to play an active role in the shape of a show,” says Alan Schulman, executive creative director for The Digital Innovations Group.

Are you friggin’ kidding me? So instead of advertising against content, they will dictate the content as well?

Schulman pushes it even further: studios “should expand their base of business from pure narrative storytelling to weaving other types of narratives like brand-centric edutainment into their offerings.”

Edutainment? Yeah, nothing says viral video success like “edutainment.” This is a guy with his finger on the pulse on the YouTube generation alright </sarcasm>.

Let me be clear: These are really, really bad ideas. It’s wedging the old model (selling ads next to content) into a new form (online) while diluting the content that attracted your viewers in the first place (edutainment).

This is a recipe for failure.

Smart Video Advertising

If you’re going to sell ads, you need to be smart about it. Here are a few hints about video ads you should know if you plan to be in this business 2 years from now:

1. Ads need to be contextual. Since there is no AdWords for video, this means a lot of work either tagging or actually selecting the ads that run against your content.
2. Users will not pay for content. As I mentioned in my last post, they will pay for a package of perks. They will also (for now) tolerate a pre-roll ad. But dictating the content? Good luck!
3. Any product placement should be handled subtly. Yes, it was Nestea that was spilled on and gave magical powers to the keyboard in CTRL. But no one needed to shove it in our faces or “educate” us about how great a sponsor was. Just make it work.

In short, if you want to create business advocates – and you should – you must think of their needs first.

And that has been the point of this blog series. It began with a discussion of which business model is best for online video consumers. Then there were suggestions for Hulu to improve their user experience. And finally a warning against putting your desires before the customer.

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This week I’ve been positing a theory to you folks: That the new creativity is ideally expressed through a freemium business model.

And today, I’d like to apply this theory. Let’s kick this idea around:

I believe a freemium model would best suit video sites like Hulu and others, rather than a traditional “subscription” model where some content lies behind a firewall. A bunch of video sites like Hulu are looking to monetize, but who will find the process that entices viewers to pull out their wallets?

Today, I will outline 7 ways Hulu could package what they already have into a freemium model users would willingly pay for (clamor for, more like it).

[Quick sidenote: For the lead-in and first official post in this series, check out the links in the first paragraph. Since this is #2 out of 3 in the series, subscribe to ensure you receive the third in this series and all subsequent posts. Now, back to the fun!]

Let’s See It In Action

If the new creativity is getting someone to tell their friends about your product, how much is a crappy ad going to convince me? Not much. And when was the last time you bragged to a friend about an old-school subscription?

The new creativity and the freemium model were made for each other.

Consumers tell their friends about great new services, especially free ones. As virally distributed critical mass builds, a certain fraction of those folks will opt for a premium version of that service.

The new creativity brings people in. A freemium model expands this audience and makes the whole endeavor profitable.

But what about Hulu? It’s nowhere near as big as Google-owned YouTube, but Hulu almost certainly has more pressure to produce profit. Ad overlays are tolerated, but a subscription model was recently mocked by CNN because it “may send most of Hulu’s users searching for alternatives.”

Consider this:

What if Hulu adopted a freemium model? What types of premiums could they offer for a small cost to a fraction of the tens of millions of people who watch?

And what if the premiums were outside the narrow realm of “content”? Ad Week reported that “A Hulu rep said the company’s strategy of offering high-quality content supported by advertising remains unchanged, while leaving the door open to adding paid content.” But what if it wasn’t just content they charged for?

If the new creativity is a method of encouraging consumers to talk about the brand to other consumers, while creating more direct access to the brand…let’s think creatively about how Hulu can create something users will not only pay for, but tell their friends about as well.

7 Ways Hulu Can Benefit From A Freemium Model

Here are just a few premiums Hulu could offer (most of which would have the secondary effect of attracting even more viewers/paid traffic). Let’s consider what conveniences Hulu really has to bargain with, and how they could be packaged:

• Access:

1. Give premium members advance notice. Allow members to view shows before the rest of the Hulu viewing audience.

2. Give members the opportunity to provide feedback. Use members to test out pilot episodes, to become a focus group of sorts. Use Hulu as a testing ground for new content such as webisodes, rather than just a repository. Let members help the show sidestep potential disasters while still in beta.

• Convenience:

3. Allow members to automatically or easily transfer their favorite shows to their smart phone or portable device. Let users create a watch list and automatically pull episodes from the web portal into whatever device they choose. Compatibility is the new convenience, so allow me to take The Office with me on my iTouch or PSP.

• Whuffie

4. Raffle off the name of a show’s character to premium members . Aussie radio hosts Hamish and Andy recently teamed up with a popular writer to name one of his main characters after a lucky listener (minute 8 in the audio). It’s a great idea to arouse support and build an audience.

5. Give away video birthday/anniversary wishes from the actors. Prominent actors in web-only shows, like Tony Hale from CTRL, give members a chance to interact on a closer level. Imagine while filming these short interviews if Hale had sent a personalized message to a winning member. A contest for this privilege would spread like wildfire considering his Arrested Development fame and it would cost the show nothing.

6. Allow members to create their own channel and earn cash. Ads still run if non-paying users watch a member’s channel. Allow the member to keep a small percentage of that income. That will fuel their desire to share the channel and push more content in front of users (allowing Hulu to charge more for ads).

• Time

7. It should go without saying, but don’t make members watch commercials ever. Period.

Some Pessimism From The Back Pew

Some experts will disagree with me, saying that viewers will simply never pay for online content. I have quotes from some top agency minds saying just that.

But later this week, I will outline why they (and that mindset) are soooo wrong. Stay subscribed and please feel free to comment below. I’d love to hear your thoughts.

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