A new forecast from Forrester Research credits greater online spending by Canadians, lower shipping costs and more selection for the spending increase.
Rather than sell, Disney, 21st Century Fox and other owners plan to invest big bucks to keep on growing Hulu.com, which generated total revenue of about $695 million in 2012.
The major entertainment companies that own digital content provider Hulu LLC have ended any ongoing speculation on the company’s future direction.
Since late 2010 Hulu, No. 92 in the 2013 Internet Retailer Top 500 has been the source of wide speculation that the company was for sale or planning a substantial public stock offering. But on Friday Hulu’s principal owners, which include 21st Century Fox, NBC Universal and The Walt Disney Co. (No. 83), announced the company isn’t for sale.
Instead Hulu’s owners will collectively invest up to $750 million over an unspecified amount of time to grow Hulu.com, which generated total revenue of about $695 million in 2012 including paid subscription revenue of about $288 million. Hulu’s owners didn’t reveal many specifics of how the cash infusion would be spent other than to say continued revenue growth is a top priority.
“We believe the best path forward for Hulu is a meaningful recapitalization that will further accelerate its growth under the current ownership structure,” says 21st Century Fox president and chief operating officer Chase Carey. “We had meaningful conversations with a number of potential partners and buyers, each with impressive plans and offers to match, but with 21st Century Fox and Disney fully aligned in our collective vision and goals for the business, we decided to continue to empower the Hulu team, in this fashion, to continue the incredible momentum they’ve built over the last few years.”
Hulu in 2012 reported an increase in total sales of 65% to about $695 million while the number of paying subscribers more than doubled. Hulu now has more than 4 million customers paying $8 a month to watch shows on TVs, personal computers, tablets and other mobile devices compared with under 1.5 million a year ago, the company says. Hulu can be accessed on more than 300 million Internet-connected devices in the U.S., with subscriptions required to watch on smartphones, tablets, video-game consoles and TVs. Hulu’s free service is available on personal computers.
The big entertainment companies are investing more in Hulu at a time when other digital entertainment content providers such as Netflix Inc. (No. 9) and chain retailers such as Target Corp. (No. 18) are investing in similar initiatives. At the end of the first quarter ended April 26, Netflix reported about 28 million paid subscribers for its domestic entertaining streaming business. Those paid U.S. subscribers Netflix refers to as domestic generated first quarter revenue of $638.6 million, up 8.3% from $589.4 million in the first quarter of 2012.
In May, Target also revealed plans for a digital entertainment service. Target Corp. is testing among its employees an online video streaming service called Target Ticket. A preview page with a “We’ve rolled out the red carpet just for you” headline touts access to 15,000 titles, including new releases, classic movies and television programs the day after they broadcast.
With more competition coming on in the digital content space, now is the right time to invest in Hulu, says Disney CEO Robert Iger. “Hulu has emerged as one of the most consumer friendly, technologically innovative viewing platforms in the digital era,” Iger says. “As its evolution continues, Disney and its partners are committing resources to enable Hulu to achieve its maximum potential.”