Freemium Web Video Model Picking Up Steam: Hulu and Ustream

Web 2.0 startups are now well versed in the the so-called ‘freemium‘ model of doing business. Give a basic level of your service away for free and then charge users for premium services. Everything from project management tools (Basecamp), collaborative learning (Grockit), online radio (Pandora) and business networking (LinkedIn) all have made this the core models of their businesses.

As we first noticed last year, the freemium model is now making its way into the online video business. Today comes news of two different sides of the web video platform spectrum—premium content site Hulu and live streaming site Ustream—hinting that they too are heading towards this model. The slower adoption of freemium in online video is in many ways linked to a decades old reliance on ad supported entertainment business, particularly in television. But recent moves are sending signals the industry may be on the heels of a turning point on the idea of paid content.

The LA Times today has outlines Hulu’s plans to allow users to watch the five most recent episodes of TV shows free, but then require a subscription of $4.99 a month to watch older episodes. Roll out of this could be as soon as six months from now, according to the newspaper’s sources. And Ustream just launched

its Pay-Per-View service with comedian Dane Cook being the first guinea pig to try it out, charging $5 to watch his “ISolated INcident” stand-up routine on February 6.

Independent web series like Jimmy Pardo’s Never Not Funny and Tiki Bar TV have both rolled out their own freemium offerings in the past year. Loyal viewers, of which both shows have a decent amount, pay for ‘memberships’ that give them higher-quality versions of the videos, along with bonus content and early access to new episodes. The results have been mixed, and for a long-running web series like Tiki Bar TV, it’s still just one of the multiple revenue streams it relies on.

“The Tiki Bar Membership model worked relatively well,” producer Tosca Musk told us. “Unfortunately, not well enough to sustain the show, but it certainly did help. And the response from fans was enthusiastic. At the end of the day, Tiki Bar TV events and merchandise have brought in more revenue than memberships. It still seems that paying to watch a show you love, after watching it for free for years, is not as appealing as supporting through others means.”

Still, there are no signs of Google-owned YouTube adding subscriptions any time soon, having built a business of selling boatloads of ad inventory against its massive global audience of video watchers and creators. With their position as the most-watched video site in the world still firmly intact, it’s unclear how wise it is for competitors to throw up pay walls for content just yet. For now, the other major video hosts have treaded lightly with pay walls. Dailymotion’s only foray into freemium so far has been the two versions of its new smartphone application—one that’s free with ads, and one that’s ad-free for $2.99.

But if Hulu, through what’s called the “Hulu effect” could condition online viewers to watch longer-form content—like half-hour and hour-long TV episodes—then it’s plausible that they could popularize the freemium model for online video—or at least on the premium side of things. Whether the externalities of that move will translate to lesser known shows remains to be seen.

What do you think – would you pay for premium access to any original web series yet?