Netflix Competition Heats Up as Rival Hulu Ditches Free Service

netflixFrom Ryan McQueeney: Netflix, Inc. (NASDAQ:NFLX) is on watch today as rival streaming service Hulu made a surprise announcement.

Hulu, one of the biggest names in online video streaming, announced today that it is moving to an all-subscription model. Previously, Hulu allowed users to access a large portion of its library through its free, ad-supported service.

For the cord-cutters out there that use Hulu to keep up with current shows, fear not, for there is another option. While Hulu moves away from its ad-supported model, it is also expanding its distribution deal with Yahoo (YHOO – Analyst Report).

Yahoo is in the process of launching Yahoo View, an ad-supported streaming service that will “replace” Hulu’s current iteration. Yahoo View will host the five most recent episodes of television shows from ABC, NBC, and Fox, as well as other shows, clips, and full seasons of anime shows.

It should also bet noted that that Hulu has already offered a subscription service that offers users access to commercial-free video streaming and exclusive original content, including a number of new TV shows.

This shift in strategy comes in the wake of the news that Time Warner (TWX –Analyst Report) recently acquired a 10% stake in Hulu, which it announced in itsearnings report last week. Time Warner joins Hulu’s other corporate owners, including Disney (DIS – Analyst Report) , 21st Century Fox (FOXA – Analyst Report) , and Comcast (CMCSA – Analyst Report) .

The launch of Yahoo View also comes at an interesting moment for the once-massive search engine. Verizon (VZ – Analyst Report) recently announced that it isacquiring the core business of the struggling Yahoo for $4.83 billion. While it is unclear exactly what changes Verizon will make, Yahoo View seems to be in-line with the recent industry norm of service providers working to own a bigger slice of the content pie.

Of course, Hulu’s move to an all-subscription service now puts it in direct competition with Netflix (NFLX – Analyst Report) . Cord-cutters are a frugal bunch, with the overall goal of ditching traditional TV being to save money.

Users looking for the free experience will be able to transition to Yahoo View rather easily, but it will be interesting to see how this changeup works out for Hulu. As always, Hulu boasts the ability to stream current episodes of shows, which makes the cord-cutting transition easier for many.

Although Netflix still dominates the market, it has to be looking behind its back as Hulu continues to adapt.

Netflix shares fell $1.90 (-1.96%) to $95.13 in Monday afternoon trading. NFLX has plunged nearly 17% since the start of 2016, plagued mainly by slowing subscriber growth.

NFLX-2016-08-08

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