Walt Disney’s Bob Iger says Hulu is in a “very tricky” business -- and we wonder what that means exactly. Perhaps a better magician needs to be called on.
It seems he is open to selling the business. The obvious candidate is a deal to Comcast/NBCUniversal, where that company has an option to buy out Walt Disney, adding to its minority stake. If that happens, that would change the dynamics of competitive leverage in the growing business of streaming.
Iger may be wondering how Hulu fits into the overall business of the advertising-supported streaming model -- especially against those fast and FAST (Free Advertising Supported Television) growing businesses -- Pluto TV and Tubi.
Just to make clear: Those are free advertising-supported streamers -- Pluto TV has already exceeded $1 billion per year in ad revenues, while Tubi will get to that mark this year.
But also to be clear, you don't see high-profile, premium original TV shows and movies on those services. Instead, they focus on lower-level library material where, for many consumers, who perhaps are older, that content is enough for their regular daily entertainment needs.
For its part, Hulu still counts on major marketing efforts to pull subscribers or keep existing ones from leaving, touting production-pricey TV series like “Only Murders in the Building” and “The Handmaid's Tale.”
Hulu still has a substantial lead over the FAST services in terms of advertising revenue, at $3.9 billion in 2022. But at the same time, there are significant production expenses remain an issue -- not just for Hulu, but other streamers.
Many now are already looking to slow down the billions spent in production expenses for TV-movie streaming -- like Paramount+. Few are willing to keep adding to their $6 billion or $10 billion spend on content. Hulu, according to industry estimates, is estimated to spend $4 billion to $5 billion.
So what’s the trajectory of Hulu -- the oldest premium streamer from the legacy TV industry? While Hulu has had a lot of success, it still hasn’t reached the level of Netflix -- which continues to thrive as well as the only streamer to be profitable.
During the Morgan Stanley media conference on Thursday, Iger said: “We have very strong original programming … and we also have a good library.” He says this makes it is “very attractive for advertisers.”
So.. what’s the beef? Iger says it concerns the “level of investment” that “we want to understand where it could go.” Read that to mean, mostly high production expenses and content issues.
That’s the rub because others have figured out you can still make lots of advertising moolah by not spending that much on content -- programming, which continues to sharply rise everywhere.
Disney hasn’t figured out where this business is headed right now. Maybe a better mix might be to offer fewer tricks.