Commentary
Would You Buy Stock in Hulu?
- by Steve Smith , Staff Writer @popeyesm, August 17, 2010
Hulu has been taking a hit in the ratings in recent months as metrics services re-think how they measure its streams. With the video advertising filtered out of the total videos counted for the site, it has plummeted in June and July's comScore rankings from No. 2 to No. 10 in terms of video content views. Still, the brand has an audience of 28.46 million people who stayed on average more than two and a half hours each for the month. The site's cumulative hang time per user per month is second only to YouTube's and everyone else trails far behind. As an ad machine, however, Hulu is monetizing as fast as it can, with 783.3 million ads served (well ahead of everyone else) but still at a relatively modest frequency.
Well Hulu may need all the good positioning and good business case it can muster if it really plans to go public. That's right. Barely three years out from conception, Hulu is sniffing around the IPO market, according to a report from New York Times' ace financial reporter Andrew Ross Sorkin and coauthor Michael J. de la Merced. The Times report says Hulu executives have been consulting with investment banks in recent weeks on the prospect of going IPO perhaps as early as this fall. The number being bandied about in these meetings is $2 billion as possible capital raised by such a stock offering.
Are those guys partying like its 1999 or what?
As The Times authors suggest, there are still some pretty formidable headwinds against IPOs altogether, let alone one from a dotcom that is pursuing an evolving model. How many pre-rolls would Kilar and Co. have to throw at these online episodes to turn them from simply profitable to the kinds of cash cows big, old media have become.
I am no investor, but even I recognize that a service like Hulu is only as good as the content that licenses into it. And given the high-velocity deal making that is going on among content owners and distribution vehicles like Netflix and various VOD providers, I couldn't say which shows will or won't be a part of the mix. Comedy Central has already pulled shows and who knows what happens when NBC comes under Comcast's wing, which has its own cross-platform TV everywhere plan in mind. If the company does go IPO than I would love to see what content commitments partners NBC, Disney and News Corp are willing to make to assure all investors that a bedrock of major media will be there for the foreseeable future.
Would you buy stock in Hulu?
Steve Smith is Editorial Director of Events for MediaPost
Well, I would've bought stock in them when they were a free service - people will throng to free video on the web. Now that they're playing around in the pay field I'm not so sure. Anybody got any adoption numbers on the Hulu Premium service? Something tells me it's less than stellar...
No.
No. To me Hulu is still part of a big experiment that the networks may not be fully committed to. Its a fine balance between cannibalizing your broadcast ad revenue. What does Comcast do if Hulu's success causes people to cut their cable? At this point no one really knows what the future financial model looks like. But I'd love to see the prospectus!
A single place for content discovery will always attract more audience and usage compared to the inconvenience of having to navigate multiple sites. Collectively the networks should be better off with such sites which aggregate their content to improve audience utility. As long as Hulu remains sensible in negotiations of partner revenue share, there will remain good reason for the Networks to continue to supply content.
However, being part of an evolving ecosystem means that sensitivity to minor changes could result in drastic outcomes. It would only take a couple of strategic miss steps from Hulu to see a retreat of content suppliers.
The bottom line from my perspective is that Hulu is a risky bet. As long as that risk is priced appropriately I would be willing to invest. I suspect, however, that the likely frenzy and hype around the IPO will see pricing driven to irrational levels.