Friday, June 25, 2010

FairPay for Hulu? (or YouTube, or...) -- A better way to charge...

With the recent reports of a pay-to-view subscription (Hulu Plus, $9.95/mo.) planned to be added to Hulu's free (ad-supported) video plan, FairPay offers a very timely way to ease the pain all around. FairPay develops a buyer reputation for payment, based on Internet feedback, to go beyond freemium, to an adaptive hybrid of free and paid content. My article on FairPay explains this radical "Fair Pay What You Want" pricing process in some depth.

Here are some brief comments relating to Hulu, and how FairPay could be used as a complement to their planned Hulu Plus offering (as suggested in this diagram).

How it works:
1. Selectively offer to let the subscriber enter the FairPay Zone, where he can set any price he considers fair after each month of subscription (Pay What You Want, post-sale).
2. Let the seller track that price and use that information to determine whether to make further offers of that kind (FairPay renewals) to that subscriber in the future.
Those who pay fairly, rise above the pay wall -- those who do not, must face it.

First, an experimental program might be offered to a selection of Hulu users based on FairPay pricing. This might be aimed at heavy users, and offer ad-free access to both current and new premium content on a subscription basis on the following terms:
  • Ad-free* unlimited access is offered on a month-by-month basis upon subscription.
  • Before the start of the next month, the user decides on a FairPay price to pay for the current month ending (with a usage report provided to the user for reference, and considering both basic and premium content viewing).
  • Depending on the FairPay price set by the user for the previous month, Hulu decides whether the subscription offer will or will not be extended for the next month.
  • By coexisting with the conventional paid subscription model, users will have a reference price, and the usage report might indicate how their usage compares to averages (for basic and premium content).
  • FairPay might be applied just to basic content, possibly in an ad-free version, to allow for a more basic FairPay service to those who don't want or qualify for the premium version.
Once tested, this FairPay subscription plan might be enhanced and offered more broadly, with more varied levels of service:
  • Price setting might gradually be reduced to a quarterly or yearly cycle for established subscribers with good FairPay reputations, easing the hassle of price setting, and extending "FairPay credit."
  • Usage reports would be provided to assist in the pricing reviews.
  • Payments might be monthly (even if price setting is yearly), for better cash flow and flexibility.
  • The options offered to any user on each renewal/pricing cycle could be adjusted based on their payment history (with consideration of any relevant circumstances known or reported). Thus those who pay better than average might get added rewards, and those who pay less might get less.
Thus those who pay fairly get increasing levels of trust and other rewards, and float above the pay wall, but those who do not get kicked back down into the pay wall.

This benefits both Hulu, and users:
  • Users feel more respected and empowered by the added trust and flexibility.
  • Users might get ad-free basic content [as a future enhancement*], at some modest cost, presumably less than the $9.95/mo. Hulu Plus rate.
  • Some will pay less than $9.95 for the premium content, but some will pay more.
  • Relating pricing to usage might help get heavy viewers to pay more, compensating for those who pay (and/or use) less.
  • Many who might refuse the conventional Hulu Plus premium service might be willing to pay something reasonable for a FairPay basic service -- added revenue to Hulu and its content partners.
  • The details of the offers and the process can be individually and dynamically tuned to encourage good payment levels, and to send free-riders back into the hard pay wall of the standard Hulu Plus (or basic Hulu) plans.
Bottom line: more happy users; more revenue to Hulu.

*Update 6/30/10: As announced, Hulu Plus is not ad-free. That does not materially change any of the points above --there is still a pay wall separating basic from premium content, and FairPay can rise above it, as outlined (simply ignore the references to "ad-free"). Future ad-free offerings might also fit in as described, as another premium segment, or as a bonus reward to those who pay better than average.