Hulu IPO A Matter Of When, Not If

Hulu is reportedly ready to raise $200 million to $300 million in an initial public offering valuing the premium video hub at $2 billion.

Citing unnamed sources, Reuters reported Friday that Hulu could file a prospectus with the U.S. Securities and Exchange Commission before the end of the year. Reached for comment, a Hulu spokesman said the company does not comment on rumors and speculation, but some analysts believe an IPO is only a matter of time.

"I think it's likely that a Hulu IPO will happen," said eMarketer senior analyst Paul Verna. "The company seems determined to make it happen, and as long as the joint-venture partners agree on this strategy there's no reason why they couldn't make it happen."

Backed by NBC Universal, Walt Disney, News Corp. and private equity firm Providence Equity Partners, Hulu recently said it expected to double the $100 million it made in 2009. According to recent comScore numbers, however, Hulu sits in the tenth spot in the "top entertainment" category, with 24 million unique visitors, compared to YouTube's 144 million. Mounting pressure from Netflix, Google, and Apple in the premium streaming space has Hulu seriously weighing its options. Some analysts, however, doubt whether an IPO will improve the company's fortunes.

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"Sure, it's nice to give the major networks that hold the shares some easy return on investment, and raising cash to invest in new content relationships is worthwhile, but that won't solve the problem that Hulu is having right now, which is that its owners haven't been providing as much content as they originally did," says Forrester analyst James McQuivey.

"The hit show 'Fringe,' for example, is not available on Hulu Plus even though it is available on Hulu.com -- likely because Fox is rethinking how it licenses content to online services destined for the TV," McQuivey adds. "This kind of confusion can only hurt Hulu in the short run, which will harm the IPO, reduce the cash they can raise, and ultimately make the service less attractive to viewers."

Sources tell Reuters that an IPO is contingent on the renewal of rights to carry shows, some of which expire in a year.

In lieu of an IPO, Hulu could bring in other media companies to contribute new programming, or raise more money from its existing partners. But at least according to eMarketer's Verna, that just won't cut it. "Hulu doesn't have many options other than an IPO if it wants to raise a substantial amount of money in short order."

What would a Hulu IPO mean for Madison Avenue?

"For advertisers, the upside (if any) will depend on whether Hulu Plus takes off," Verna said, referring to Hulu's premium content service. "If it does, advertisers have little to look forward to, since most of the online video platforms would then be supported by paid content models. On the other hand, if Hulu maintains a healthy ad-supported system (as the free Hulu has been to date), and if Google TV succeeds in aggregating more online eyeballs on TV sets, then advertisers could look forward to new opportunities in digital video."

In August, The New York Times first reported rumors of a Hulu IPO at a valuation of more than $2 billion.

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