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Hulu rehearses its sales pitch: more video; more subscribers

July 6, 2011 |  3:04 pm

BOBIGERsunvalley

Now that Hulu is on the auction block, its media company owners are making sure the popular online video website gets plenty of exposure.

On Wednesday, at investment bank Allen & Co.'s annual gathering of media and tech moguls in Sun Valley, Idaho, Disney Chief Executive Bob Iger told reporters that Hulu's owners, which includes Disney, were "committed to selling" the 3-year-old venture.

"There is a lot of interest," Iger said, according to Bloomberg News.

Bankers representing Hulu in the last few weeks have had discussions with more than a half-dozen major media and technology companies, including Google Inc., Microsoft Corp. and Yahoo Inc., according to people close to the process.

Hulu's owners, which also include Fox parent News Corp., Comcast Corp.'s NBCUniversal and private equity firm Providence Equity Partners, have concluded that the venture's complicated governance structure is unwieldy, making it difficult for the three media companies and the minority owners to reach consensus. 

In addition, this seems to be a particularly advantageous time to sell because of Wall Street's increasing appetite for shares of technology firms that are now going public.

Also on Wednesday, Hulu Chief Executive Jason Kilar (who has a small ownership stake in Hulu) posted a blog trumpeting Hulu's second-quarter business highlights.

The Hulu Plus subscription service is on track to exceed 1 million subscribers by the end of the summer -- a few months ahead of schedule, Kilar said.

"We just closed our biggest month in Hulu Plus paid subscriber net additions by a healthy margin; we added more paying subscribers in June than we did in April and May combined," Kilar wrote. "We are extremely encouraged by the ramp of this business."

Hulu anticipates taking in $500 million in revenue this year.

The service, Kilar pointed out, also is a good citizen.  Hulu paid media companies that provide content to Hulu Plus "approximately $8 per subscriber per month" for programming found on Hulu Plus.  That represents a combination of income from the $7.99 a month subscription fee as well as advertising revenue to the site.

Q2Hulu_Sub_Growth
Hulu is benefiting from the proliferation of Internet-connected devices, including Xbox 360, Kinect, some Android smartphones and certain Samsung Blu-Ray players. The service also boasts more offerings. For example, in June,  Hulu Plus added episodes of the Comedy Central hit "South Park."

The media companies have long demanded that Hulu build the subscription business rather than simply focus on the original free Hulu site, which is supported by advertising revenue.

Since November, when Hulu Plus officially launched, the library of programming has grown to 28,000 hours of shows, up from 13,000 hours, Kilar said.

"As Hulu Plus increases in scale and scope, we believe significantly more dollars in aggregate will move to the content community than has historically been the case in the industry," Kilar said. "These economics are made possible by our ability to thrive on low margins and the unusually effective Hulu advertising service we’ve built and will continue to innovate."

Sound like a winning sales pitch?

RELATED:

Google may be poised to bid for Hulu

Hulu is popular, but that wasn't the goal

Hulu said to hire bankers to explore possible sale

Yahoo approaches Hulu about possible acquisition

-- Meg James and Dawn C. Chmielewski

Photo: Disney Chief Executive Bob Iger. Credit: Peter Foley / Bloomberg

Graphic of Hulu Plus subscriber growth/Hulu

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