Tuesday, June 19, 2018

What to do with Hulu


Launched 8 years ago, Hulu’s subscription service is an over-the-top streaming service that is jointly owned by Disney (30%), Comcast (30%), Fox (30%), and AT&T/Time Warner (10%).  Hulu offers subscribers the ability to stream television programming owned by its joint venture partners, as well as content created by Hulu and other content providers.  The basic Hulu package costs $7.99 per month with limited commercials and $11.99 with no commercials.  Hulu Live which was launched in 2016 provides live streaming of 50 broadcast and cable channels.  For additional fees, subscribers can add on HBO, Showtime, and Cinemax to any of Hulu’s offerings.

Disney and Comcast are in a bidding war to acquire some of Fox assets, including the 30% ownership in Hulu.  Whoever wins will become the majority owner of Hulu with a 60% ownership stake.  Interestingly, both firms have hinted that they are willing to sell off the Hulu assets to gain regulatory approval of the deal.  Why?
·       -- With higher costs to acquire and now create original content, Hulu lost nearly $1.8 billion in the past three years and is expected to lose close to that in 2018.
·         -- Both Disney (using BAMTech) and Comcast (Xfinity Instant TV) are investing tremendous amount of resources to go Direct-to-Consumer (DCS) on their own.  Is Hulu more of a substitute rather than a complement to these services? 
·        --  Is Hulu near the end of its useful life in a television programming market that is becoming increasingly fragmented?

Not so fast!  Why should Comcast or Disney fight to keep its stake in Hulu?
·       --  As of the end of 2017, Hulu had 17 million subscribers.  It is the second largest SVOD after Netflix.  That critical mass of subscribers gives leverage in negotiating partnership deals (like the one with Spotify in April).
·         -- Hulu’s service bundled with the winning bidder’s DCS could be very attractive to customers.
·         -- Who would buy the take in Hulu?  AT&T?  Facebook?  CBS?

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