Hulu is in Play (Maybe)

Eleven years ago, Hulu was born.  A joint venture among three of the four broadcasters, each with a 30 percent share, and Time Warner.  The JV provided an opportunity among the partners to test the over-the-top (OTT) streaming market without the full commitment of doing it on their own.  While the JV lost money each year, nearly $1 billion in 2017, there were some positives, including:

1)      Learning a lot about the OTT market, including an understanding (with data to back it up) of consumer preferences on what/where/when they watch

2)      A loyal customer base of 20 million and growing who skew much younger than the average TV viewer.

3)      Another distribution platform to license content to (e.g. NBC’s Law and Order episodes)

4)      Investment in award-winning original content (e.g. Handmaid’s Tale)

But, in 2018, a lot has changed that challenges the sustainability of the Hulu business model.  They are:

1)      When Disney finalizes its acquisition of the Fox assets in 2019, it will control 60 percent of Hulu.  Will Disney need/want Hulu when it will have its own direct-to-consumer platforms to distribute and market its content? 

2)      Comcast is behind CBS, Disney, and AT&T/Time Warner in going direct-to-consumer.  But, as the soon-to-be largest international Pay-TV distributor, does it really need to be a minority partner in a streaming service that dwarfs its own reach and that of its largest competitor, Netflix?   

For Comcast, the value of getting Fox’s 39 percent interest in Sky is way greater than keeping its 30 percent interest in Hulu.  But, maybe it can use the Hulu business as a part of payment package to get the rest of Sky.  Will Disney take the bait?  They might, but I’m not sure it is worth it.