I'm not sure that's necessarily true. On the web, it's often the less savvy users that convert best in response to advertising. For example, a lot of money is made online selling payday loans, ringtone-related subscription-billing junk, and 'magic' tooth-whitening and weight-loss formulas. Ignorant, poor people are often the most easily monetized, and I'm guessing they're often the least likely to value their time enough to pay $15 to avoid ads.

I'm not saying you're wrong, but I don't think it's as straightforward as you indicated.

Eh, I can afford the no-ad premium. But I prefer the ad one, as sometimes they are interesting, and they are always more interesting than the wretched Amazon screensaver pics.

Also, the ads are not on the media itself, nor do they interrupt it. They are not intrusive, and do not bother me.

That's lazy reasoning.

I know lots of people that have >$500 dollar phones, who refuse to spend any money on apps. They only install free apps - it doesn't matter if a one buck app will save them time or money, they want free apps and only free apps.

It's not getting paid twice. The reason there's no option for "free with ads" is because ads have diminishing returns. Each extra ad you show makes customers less likely to buy a given product. Advertisers won't pay as much if they're part of a giant block of ads.

For the company to get the same amount of money, the trade-off curve looks something like this:

Pay $x, see 0 ads.

Pay $0.75x, see 1 ad.

Pay $0.5x, see 4 ads.

Pay $0.25x, see 20 ads.

Pay $0, see 50 ads.

Some customers prefer to pay with their eyes instead of their wallets. You don't like to do that. I don't like to do that. But it's fine that companies give us the choice.

Also, you pay for broadcast TV?

Be careful what you wish for... They could start microtransactions where you can 'Watch Hulu+ TV Episode with Ads for Free' or 'Watch this episode without adds for an additional $0.50' :P Then again, it may not be such a bad thing.