Hulu's been a breakout success. It also lost $920 million last year

This post was originally published on this site
hulu logo

Hulu’s got critically acclaimed content, a growing number of subscribers and determination to take on its bigger rivals.

But it’s losing a ton of money in the process — $920 million in 2017, according to an analysis published last week by the financial services firm BTIG.

That’s nearly as much as the $1 billion that the service’s four owners — Comcast (CMCSA), Disney (DIS), 21st Century Fox (FOXA) and Time Warner (TWX) — invested in it last year, wrote BTIG media analyst Rich Greenfield. (CNN is owned by Time Warner.)

Greenfield said his firm expects Hulu will lose nearly $1.7 billion this year.

Hulu declined to comment about the analysis.

It’s not surprising that the company would lose money.

Netflix (NFLX) plans to spend as much as $8 billion on original content this year. But Netflix has about 118 million subscribers, along with worldwide reach. Netflix can spend that much money and turn a profit (it earned more than half a billion dollars last year).

Hulu doesn’t have the luxury of a large audience — just 17 million subscribers. That’s growing, but Netflix is still seven times bigger.

“The problem with Hulu’s losses are, they are not global, and the number of subscribers is not that large,” Greenfield told CNNMoney this week. “It points to just how difficult it is to replicate what Netflix has built.”

Related: ‘Handmaid’s Tale’ effect? Hulu grows to 17 million subscribers

The competition to attract cord-cutting TV viewers is fierce. Amazon, HBO and Apple TV are also all plunking down big money on shows.

Hulu hasn’t been shy about spending, either. In addition to airing originals like “The Handmaid’s Tale,” it also has snagged the rights to popular throwbacks like “Seinfeld, “Golden Girls” and “Full House.”

And less than a year ago, it launched a new live TV streaming service with content from ABC, CBS, Fox, NBC and a slew of cable channels.

Hulu has touted its investments and the results in recent weeks. The company announced in January that it generated $1 billion in ad revenue in 2017.

Daniel Ives, an analyst with GHB Insights, described the multi-billion-dollar battle between the streaming services as an “arms race.” And he said the competition is what makes Hulu’s relative success remarkable, despite its losses.

“What Hulu’s accomplished, with much less resources, has been admirable and impressive,” Ives said. “And it speaks to why it’s one of the crown jewels that Disney was attracted to.”

Disney’s interest in Hulu will likely be a big factor in determining the service’s future. The company announced late last year that it would try to buy most of 21st Century Fox, another partial owner of Hulu, for $52 billion.

Related: Disney is buying most of 21st Century Fox for $52.4 billion

It’s not yet clear how Hulu could change, and Ives said Disney would likely want to keep its intentions quiet when the deal works its way through antitrust regulators.

But if the deal is successful, Disney’s 30% stake in Hulu would become a 60% majority. And the company would add big-name Fox franchises like the X-Men and Avatar to a lineup that already includes the Marvel Cinematic Universe and Star Wars — all fodder to consider for distribution on Hulu.

“The best thing that ever happened to Hulu was Disney buying Fox,” Ives said. Disney already has plans to launch its own streaming service next year, but Ives suggests that Hulu could be complementary.

“It’s going to be a two headed monster that they are going to compete against Netflix,” Ives said. While he expected Disney to treat its standalone service as its big moneymaker, he said Hulu would still be “the little brother.”

Greenfield cautioned, though, that the deal isn’t done yet. Hulu’s future would also depend on what Comcast, another 30% owner, has planned. The Wall Street Journal reported earlier this week that Comcast, which has tried to buy Fox in the past, is considering a new bid.

“It actually isn’t clear whether the Fox acquisition makes running Hulu dramatically easier,” Greenfield said. Unless Disney can fully own the service, it would still have to contend with another meaningful partner.

“Hulu’s future is totally up in limbo,” he added. “The reality is, Hulu does a great job of generating revenue for its parent companies … What Hulu’s longterm role in the subscription video-on-demand space is, is unclear.”

Be Sociable, Share!

Related Posts

 

MarketTamer is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of MarketTamer are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.


This company makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.


The content on any of MarketTamer websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options. The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.


The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.