Light Reading

Hulu Flexes Fresh Muscles

Alan Breznick
12/19/2013
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In another clear sign that over-the-top (OTT) video providers are increasingly setting the agenda in the swiftly changing pay TV market, one of the top OTT players revealed fresh financial, subscriber, and other metrics this week that show how much of a force it is becoming.

The OTT player, Hulu LLC , is flexing its muscles at the same time that such other major OTT providers as Amazon.com Inc. (Nasdaq: AMZN) and Netflix Inc. (Nasdaq: NFLX) are also throwing their weight around by investing more heavily in original programming and such new technologies as 4K UltraHD. Hulu and the other OTT upstarts are also making advances at the same that many cable operators and other traditional pay TV providers are feeling under siege from shrinking video subscriber totals and growing price wars.

Hulu made probably the biggest splash this week, announcing Wednesday that it will scale $1 billion in revenue this year. That total, up more than 40% from $695 million in 2012 and 150% from $400 million in 2011, represents quite an achievement for the five-year-old company just a few months after its three often quarreling co-owners -- 20th Century Fox , Walt Disney Co. (NYSE: DIS), and Comcast's NBC Universal -- almost sold it off for the second time in less than two years. (See What Now, Hulu?)

In a blog on the company's Web site, new Hulu CEO Mike Hopkins boasted that the company has now signed up more than 5 million paying subscribers for its Hulu Plus premium service, another big jump from slightly over 3 million at the end of last year and about 1.5 million at the close of 2011. So, in just the span of a couple of years, Hulu has gone from a non-player to a major player in the subscription video space.

Even more notably, Hopkins revealed that half of those Hulu Plus customers are now streaming Hulu's heavily broadcast TV programming "exclusively" on Web-connected mobile devices. He also noted that more than 400 million Web-connected devices in the US can now access the Hulu Plus service, including Microsoft Corp. (Nasdaq: MSFT)'s new Xbox One game console, Roku Inc. streaming media players, and Samsung Electronics Co. Ltd. (Korea: SEC) smart TV sets. The number of connected devices is rapidly growing.

Further, Hopkins said Hulu plans to follow in Netflix's footsteps by investing more heavily in creating original TV shows. He said Hulu, which developed more than 20 original programs in 2013, will double that number over the next few years after seeing several of its original programs rank among the most popular on the service.

"We look forward to increasing our overall content offerings," said Hopkins, noting that Hulu already has a vast library of 2,900 TV series, 86,000 show episodes, and 68,000 hours of video. He said Hulu "will continue to invest in last night's TV, original first-run TV programming, and great library TV from the US and other markets."

It's no wonder that such pay TV powerhouses as Comcast Corp. (Nasdaq: CMCSA, CMCSK), Cox Communications Inc. , AT&T Inc. (NYSE: T), and Verizon Communications Inc. (NYSE: VZ) are reportedly eager to jump into bed with Hulu now. With Hulu's offerings integrated with their existing programming, the big MSOs and telcos would have another way to lure in new customers and satisfy existing ones while eliminating, or at least reducing, Hulu as an increasingly powerful rival. (See Hulu Cozies Up to Cable, Telcos .)

Now it's just a question of whether the MSOs can strike a decent deal before Hulu's three owners change their minds again and decide to sell off the service to a competitor like DirecTV Group Inc. (NYSE: DTV).

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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albreznick
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albreznick,
User Rank: Blogger
12/30/2013 | 5:29:46 PM
Re: 2014 will be the year of SVOD original content
Great. Thanks. I got it. Looking forward to going thru it.  
pbhurley
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pbhurley,
User Rank: Light Beer
12/24/2013 | 6:24:55 PM
Re: 2014 will be the year of SVOD original content
Yes, I'll email it to you, Alan.  
albreznick
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albreznick,
User Rank: Blogger
12/23/2013 | 7:56:34 PM
Re: Not So Hot When Compared to Netflix
Stranger things have happened, Dan. I'd rule nothing out at this point. You may be right about the new Hulu originals. But let's see what they come up.  
albreznick
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albreznick,
User Rank: Blogger
12/23/2013 | 7:55:08 PM
Re: 2014 will be the year of SVOD original content
thanks. I'd be interested in seeing what you had to say about SVOD original content. Can you send the pages direcrtly to me?
DOShea
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DOShea,
User Rank: Blogger
12/23/2013 | 11:08:48 AM
Re: Not So Hot When Compared to Netflix
I don't see how a sale to a cable competitor would even happen at this point, given Hulu's recent further cozying to the biggest players. Original content definitely will help, but I'm betting such content is more likely to be spin-offs of popular original cable fare--nothing truly original or trend-setting in itself.
pbhurley
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pbhurley,
User Rank: Light Beer
12/21/2013 | 8:55:59 PM
2014 will be the year of SVOD original content
Nice post, Alan. Growing libraries of original content are definitely going to make already formidable SVOD services like Netflix and Hulu even more so. Five million paying Hulu subscribers is nothing to sniff at.  Original content should certainly help them increase their appeal with cord cutters / shavers and maybe even provide a nice hedge against soaring content licensing costs.  

I posted a few pages on the outlook for SVOD original content as part of an online video trends report that I just published to Slideshare. Thought it might be of interest. 
albreznick
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albreznick,
User Rank: Blogger
12/19/2013 | 5:52:48 PM
Re: Not So Hot When Compared to Netflix
All good points, Karl. Hulu is certainly no Netflix and likely will never be. But it does seem to have turned a corner now and it is growing rapidly. So I think it could be a real force in the market, as long as its owners want it to be. As you say, that's really the key question.
KBode
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KBode,
User Rank: Light Sabre
12/19/2013 | 5:48:48 PM
Not So Hot When Compared to Netflix
While that's a promising metric and they've certainly made some improvements, it's much less sexy when compared to Netflix, which was launched some two months later in 2008. Netflix revenues are $900+ million per quarter, and they added 10 million subscribers in a year, a number Hulu has never reached in total.

I still don't think Hulu can be truly successful until it's allowed to be truly disruptive, and that's not happening with owners whose decisions are made primarily based on legacy market protection and fear. It's a glorified ad for traditional cable TV to my mind, with a fractured and incomplete catalog of shows each time I'm in there looking for content.
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