Hulu: no longer third in a two-horse race | Major Businesses | Business
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Among the worst fears of all firms is that a competitor arrives from out of the blue and is utterly disruptive to an existing business strategy and takes away what the company expected to gain. This is precisely what happened to Hulu with Amazon; but now the J/V OTT service seems to be turning things around.

Hulu VR 25 MarchIronically this renaissance that Hulu may be about to enjoy is through a traditional complement to its all so modern skinny bundle that everyone seems to be offering these days.

In a recent study, leading TV and broadcast analyst MoffettNathanson noted that in what it called the ‘frenzied rush’ to launch virtual MVPDs that would attract incremental subscribers and offset the declines of the pay-TV industry, most attempts have essentially re-created the same bundle of broadcast networks and their affiliated cable networks at a similar $35 to $40 entry-level price points.  It added that these price points were no accident, as they represented the lowest entry level price that both stimulates demand and ensures that these ventures are at least on the face of it profitable.

On paper Hulu has always seemed to be an excellent proposition. Unveiled in the heady days when Netflix called itself an OTT, rather than a subscription video-on-demand, service, the company has enjoyed since launch in 2007 the selected fruits of its joint owners The Walt Disney Company, 21st Century Fox and Comcast. In August 2016, Time Warner came on-board and not before time – the company had by then well and truly been usurped by Amazon in the prime rival to Netflix stakes and appeared to be going backwards. But perhaps no more - and all thanks to the emergence of skinny bundles and Hulu's ace in the hole with live TV.

Hulu unveiled its live TV streaming service in May 2017, offering more than 50 channels right at the sweet spot described by MoffettNathanson, namely $39.99 per month with content not only from CBS, NBC, ABC and FOX through its parents, but also Scripps Networks Interactive, to include live and on-demand programming such as HGTV, Food Network and Travel Channel at launch, as well as DIY Network, Cooking Channel and Great American Country. “Our networks attract large upscale audiences looking for compelling family-friendly content, and are must-haves for advertisers and distributors alike,” said Scripps Networks Interactive chairman, president and CEO Ken Lowe. “Hulu has already built a strong and loyal customer base, and the new live TV streaming service will be an important addition for consumers looking for new ways to access the world’s best content.”

Hulu is also the exclusive streaming home for NBC hit This is Us, a hugely significant move given that it outbid both outbidding Netflix and Amazon for what is reportedly a record-breaking per-episode fee. The service, which is in beta, also comes with 50 hours of DVR capability, and an optional ad-skipper for $15 per month. Crucially through CBS and Fox, the offer contains a whole choice of sports that some of its rivals do not contain.

And the industry has taken note. While it was continuing to question the motivation for existing MVPDs to enter the virtual space, MoffettNathanson believed that the analysis for Hulu’s owners was pretty clear: “If successful, Hulu will accelerate the ‘have’ vs. ‘have-not’ dichotomy of the industry, accelerate the addressable advertising model and create a competitor to existing MVPDs, which require them to continue paying up for Hulu owners’ content,” it suggested.

MoffettNathanson sees Hulu as cannibalising existing MVPDs and gaining relative viewing, advertising and affiliate fee share at the expense of those networks that it does not carry. Crucially the analyst sees Hulu as actually generating money – its subscription revenues outweighing programming costs. Unlike some leading SVOD packages right now. That is, Netflix. The business winds look set fair for Hulu to sail back into contention.

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