There’s no such thing as a free lunch–but there is free Hulu

Well…I broke.

Over a year ago I wrote about how I continued to purchase individual songs from iTunes rather than subscribe to Spotify Premium or Apple Music (read the article here). Now, two years older and in the middle of my last semester of undergrad, I decided to take advantage of my student status and subscribe to Spotify Premium, which just conveniently offers ad-supported Hulu in addition to a premium Spotify account.

The past sixth months of pandemic life changed the way I viewed streaming services. First, it was the Netflix subscription in April (I missed the Tiger King era). Then I mooched Fleabag off a friend’s Amazon Prime account. And now, even though I swore I would never subscribe to Spotify, I study to ad-free instrumental lo-fi and browse the latest indie playlists in my search for new bands.

Although I am admittedly late into the streaming game (one of my friends responded to the news with “This is a big day to remember!”), the two-part tariff is implemented in many other aspects of daily life. Costco, for example, uses this model. Customers pay for a Costco membership, which grants them access to bulk purchases and discounts. Airlines offer tiered subscriptions with promises of lounges and earlier boarding times. Dating apps allow you to swipe more.

Why is this model so alluring to consumers? Spotify, for example, promises users unlimited free streams, resulting in consumers enjoying a large consumer surplus. Spotify claws back this consumer surplus by offering subscription services in the form of ad-free listening and non-shuffled play for mobile devices. These subscription costs provide a different stream of revenue outside of advertisements.

Are we as people particularly susceptible to only seeing the consumer surplus gained from the initial part of the model? Or do these types of services genuinely offer us a good deal? I’ll mull over that question, but until then I’ll stream uninterrupted forest noises while I read and then binge watch Law & Order: SVU on my newly subscribed student Hulu.

About Rachel Kadoshima

Rachel is a senior economics and French language student

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