Hulu’s price cut and Spotify tie-in suddenly make more sense

Here’s an interesting tidbit from a recent New York Times story about the growing rivalry between Netflix and Hulu:

The [ad-supported plan] is Hulu’s most lucrative business and points to future profits. Even though it charges $6, the service generates more than $15 in revenue per subscriber each month, because of the high-cost advertising sold against those customers, according to two people familiar with the business.

That would explain why Hulu recently dropped the price of its ad-supported plan from $8 per month to $6 per month, while leaving its commercial-free plan at $12 per month, and why Hulu is now free with a $10-per-month subscription to Spotify Premium. Although Hulu expects to lose $1.5 billion this year, majority owner Disney is aiming for profitability within four years, and much of that could come from scaling up the ad business with a larger subscriber base.

Still, Hulu says it has no plans to increase its ad load, and has even limited commercial break times to 90 seconds, down from 180 seconds to 240 seconds previously. The service is instead experimenting with new formats such as banner ads that appear when you pause.

We reached out to Hulu for comment and will update if we hear back