What makes Hulu so valuable? Despite revenue streams that aren't fully realized yet, the Hulu...

What makes Hulu so valuable? Despite revenue streams that aren't fully realized yet, the Hulu (DIS, CMCSA, NWS) brand is already worth more than any of the networks, argues RBC Capital Market's David Bank. Though still only a minor player on the subscription side, the company sits in a dominant position to take advantage of the boom expected in online video advertising. Does the drop today in Netflix (NFLX -6.3%) have more to do with the threat of Hulu being owned by a bigger company than disappointing reviews for Arrested Development?
From other sites
Comments (9)
  • Money Investor
    , contributor
    Comments (530) | Send Message
    Yes - I identified this risk a few weeks ago. http://seekingalpha.co...
    28 May 2013, 03:59 PM Reply Like
  • James Sands
    , contributor
    Comments (2635) | Send Message
    I have not yet performed a recent thorough review of Netflix (currently underway), however, it doesn't seem much has changed from a fundamental perspective, company is free cash flow negative, despite high expectations to get back to strong profitability over the next couple years.


    Long-term Hulu's model is much better suited to serve as a more conventional content distribution and advertising platform versus Netflix (much more relevant and important in my opinion).


    Big players may shift to streaming their content sooner rather than later, which potentially complicates the Netflix structure. Hulu fits nicely into this. Companies like Discovery and Disney have added value with well recognized content and may be able to develop their own streaming platforms without a Hulu. This remains to be seen. Revision3, Test Tube, etc. are not directly streaming the Discovery Channel, Animal Planet, Investigation Discovery, just yet.


    Without advertising and a proven content development record for sustainability, it will be interesting to see how Netflix evolves during the next 5-10 years.
    28 May 2013, 04:02 PM Reply Like
  • chriff
    , contributor
    Comments (117) | Send Message
    The only problem I have with this idea is that while Hulu was/is owned by the "content creators," they still couldn't get them to fully release everything for streaming. How will this get any better when a 3rd party owns Hulu? They will just run into the same issues that Netflix has been facing. Especially given that the biggest appeal of Hulu is streaming relatively new shows.
    28 May 2013, 04:31 PM Reply Like
  • James Sands
    , contributor
    Comments (2635) | Send Message
    I agree mostly with you chriff.


    Old traditional content developers are fighting the streaming shift for as long as they can. And cutting Hulu free allows them to make more money off of Hulu if a buyer is willing to take on similar contract agreements as Netflix and Amazon Prime.


    I still think that Hulu having advertising growth provides an additional stream of revenue. CPM rates will increase for video advertising and mobile video advertising over time.


    Ultimately, one of the big media conglomerates will stream directly, it is just a matter of time. Owning Hulu is a valuable asset in the event one decides to go this route.


    There is more money to be made directly streaming content to monthly subscribers versus signing 7-year agreements with Dish, Direct TV, Comcast, Cox, Time Warner, etc. all combined. The media company just needs to have the right demand for its content. Consolidation will pick up over the next few years.


    And then the entire bundling and packaging, higher costs, etc. will just begin again in a different structure.
    28 May 2013, 06:37 PM Reply Like
  • DIgitalMediaView
    , contributor
    Comments (631) | Send Message
    AD4 disappoints, Viacom library is pulled, there are renewed competitive threats...Take your pick. When a stock is this over-valued—priced beyond perfection—investors' sky-high expectations make it almost certain that we'll see strong price reaction as valid questions and real concerns inevitably arise.
    28 May 2013, 04:54 PM Reply Like
  • Andrew Shapiro
    , contributor
    Comments (2146) | Send Message
    Or could it be the value ascribed to Hulu on rumored bid prices on a per subscriber basis is far far lower multiple per subscriber than netflix?
    28 May 2013, 04:59 PM Reply Like
  • James Sands
    , contributor
    Comments (2635) | Send Message
    I thought this initially too. $800 million for 4 million subscribers is about $200 per sub. Netflix has 36 million streaming subs, which would equate to $7.2 billion, excluding the DVD business of course with multiple pricing plans.
    28 May 2013, 06:32 PM Reply Like
  • BigJ1260
    , contributor
    Comments (204) | Send Message
    Just bought some calls
    Reed Hastings on CNBC in the morning and he spins it like no other
    28 May 2013, 05:20 PM Reply Like
    , contributor
    Comments (85) | Send Message
    How about SOMEONE get out the crystal ball here, and address that
    MAYBE, all of this dithering about HULU is hurting DIS stock prices ?
    31 May 2013, 06:31 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs