Rising online video streaming platform, Hulu is owned by a group of media powerhouses that includes The Walt Disney Company (NYSE:DIS), Comcast Corporation (NASDAQ:CMCSA) and News Corp (NASDAQ:NWSA). Hulu has significant leverage in signing up new users, as well as add content on more favorable terms to its platform, as it is owned by three of largest content companies in the world. Unlike the runaway leader in video streaming, Netflix, Inc (NASDAQ:NFLX), Hulu has free and paid versions.
Hulu was launched in October 2007, that currently operates in Japan and the U.S. Hulu Plus now has more than 3 million paying subscribers. The company stated that the number of paying subscribers in Hulu Japan has tripled from Dec-2011, and content addition has increased four-fold.
Just like Netflix, Inc. (NASDAQ:NFLX), Hulu can be accessed from almost any device with an Internet connection. Both Hulu and Hulu Plus include commercial ads on its streaming services, which reduces the appeal of Hulu to consumers because the rivals offer an ad-free streaming experience.
Hulu ramped up its content offerings by more than 40% in both Hulu and Hulu Plus in 2012. The company invested more than $500 million in content. And its content library now includes over 60,000 TV episodes from more than 450 content partners.
The bigger players – Amazon.com, Inc. (NASDAQ:AMZN), Netflix and Hulu are all producing original content, which makes their service markedly different from each other. Hulu is also adding a mix of original and exclusive content rapidly. It launched more than 25 Hulu Exclusive and Original Series and a number of them will be airing on 2013.
Hulu is ramping up its advertising efforts and had more than 1,000 advertisers during 2012, which is up 28% year-over-year. It intends to be a bigger player in the video advertising space, and it charges users only when the ad has been fully streamed in its platform, which is rather similar to YouTube.
Even though the paid version, Hulu Plus kicked off its official launch in late 2010, the company’s subscriber growth has been very solid. Hulu Plus has a price point right in line with Netflix, Inc. (NASDAQ:NFLX) and portrays video commercials which make its service more comparable to regular TV.
At the end of 2012, Hulu Plus had more than 3 million paying subscribers, and the number of subscribers more than doubled from 2011.
Source: Company Data, Estimates
Netflix, Inc. (NASDAQ:NFLX) is the leader in low-cost video streaming with roughly 30.4 million paid users, which is substantially higher than Hulu’s paid subscriber count of 3 million. In addition, Amazon is increasingly ramping up its content offerings and trying to sell more annual subscriptions of its Prime service which has an estimated 5-10 million users.
The recent launch of Redbox Instant by Coinstar, Inc. (NASDAQ:CSTR) and Verizon Communications Inc. (NYSE:VZ) also brings in more competition in the Internet streaming space. Redbox currently offers only 4600 titles along with 4 DVDs redeemable at thousands of Redbox kiosks across the country. Redbox Instant’s CEO stated that its service will appeal to a different clientele who enjoy physical discs. And also, Redbox Instant is unlikely to pursue an original content strategy in the near-to-medium term.
In addition, Time Warner Inc. (NYSE:TWX)’s premium cable network, HBO had more than 114 million subscribers across the globe consisting of 41 million premium subscribers in the U.S. and 73 million international premium and basic subscribers at the end 2012.
As users need cable and an HBO subscription to view HBO Go, the price point is at a much higher rate, compared to the other lower cost streaming services.If HBO Go is offered as a standalone service it will be a material threat for other low-cost streaming companies.
Hulu’s co-founder and CEO, Jason Kilar will be handing over the reins by the end of March, and will be replaced by another senior executive, Andy Forssell in the interim CEO. News Corp (NASDAQ:NWSA), Disney and Comcast Corporation (NASDAQ:CMCSA) each own about a third of the company.Disney and News Corp. are in discussions regarding the company’s future, and are considering selling the company and also altering its business model. Walt Disney wants an advertising-based business model, whereas, News Corp. prefers a subscription-based model.
As a result, Disney or News Corp (NASDAQ:NWSA). might consider buying the stake of the other. Comcast’s NBC had to hand over its voting rights and board seat, in connection with Comcast’s controlling position of NBC.
As a result, Comcast Corporation (NASDAQ:CMCSA) would likely stay on as a minority investor. In October 2012, Hulu bought back 10% of the company from Providence Equity Partners’ for $200 million, giving the company a valuation of $2 billion, which likely factors in a big discount for lack of marketability. However, Disney and News Corp are currently in the process of putting together their future plans for Hulu.
Control of Hulu in the hands of News Corp. or Disney shouldn’t have a big impact. Hulu stated its top-line revenues grew 65% year-over-year to ~ $700 million; however, it did record a loss driven by higher programming and marketing costs.
In spite of these numerous changes going on at the company, Hulu’s outgoing CEO stated that the company is all set to hit new records for both revenue and subscriber additions in Q1 2013. And Hulu continues to get content from its current owners at favorable terms, and can add many subscribers down the road.
The article Hulu Becoming Stronger in Video Streaming originally appeared on Fool.com and is written by Ishfaque Faruk.
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