Netflix, Inc. (NFLX) Benefits From an Independent Hulu

Again, even adding in the cost of Hulu, an Internet package of Hulu, Amazon Prime and Netflix, Inc. (NASDAQ:NFLX) would cost only $271 per year — still much less than a year of cable.

Is Hulu independent?

But it isn’t really fair to call Hulu an independent company. Comcast, The Walt Disney Company (NYSE:DIS) and Fox control the online streaming service. Still, keeping the status quo might’ve been better than some of the potential suitors.

For example, DirecTV (NASDAQ:DTV) submitted a bid to buy the company, which is interesting, given how exposed the satellite TV provider is to the online alternatives. Nearly all of DirecTV’s revenue comes from its 20 million paying TV subscribers, and a meaningful loss of subscribers would devastate the company.

A company like Comcast is somewhat protected because of its Internet service. In theory, if there was a meaningful move away from paid-TV, Comcast could simply raise the cost of its Internet services to offset declining TV revenue. DirecTV (NASDAQ:DTV) doesn’t have this luxury.

DirecTV (NASDAQ:DTV) could’ve used Hulu to hedge itself against the rise of Internet alternatives — or it might’ve just shut the service down (or fundamentally changed it past the point of recognition). Getting rid of an online competitor could help to keep its business model viable.

There’s reason to be bullish on DirecTV in the near-term (namely, a possible takeover bid from DISH Network), but in the long-run, a company that relies exclusively on traditional paid-TV is exposed to cord cutting.

Netflix shareholders should be pleased

The decision by Hulu’s owners to keep the company should be welcomed by Netflix, Inc. (NASDAQ:NFLX) shareholders. With original shows and exclusive deals replacing the old business model of run of the mill, recycled content, the online video providers are shifting from competitors to compliments.

A strong, independent Hulu, combined with a Netflix and Amazon Prime subscription, could be a potent alternative to traditional paid-TV packages.

The article Netflix Benefits From an Independent Hulu originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, DirecTV, and Netflix. The Motley Fool owns shares of Amazon.com and Netflix. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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