Posted on Friday, Dec 16th 2016
According to a MarketsandMarket report, the global video streaming market is estimated to grow from $30.29 billion in 2016 to $70.05 billion by 2021, translating to an annualized growth rate of 18.3% over the five year period. In the US, according to a Statista report, YouTube dominates the market with 77.6% streaming share, followed by Netflix at 8.6%. Hulu comes in a distant third with 2.2% market share. But Billion Dollar Unicorn Hulu is going all guns blazing to increase its share.
Founded in 2008, Hulu was launched as a conglomerate project for Comcast’s NBC Universal and News Corp. A year later, driven by the increasing demand for online streaming services, Disney also decided to invest in the venture. Earlier this year, Time Warner became the fourth biggest investor to support Hulu’s live streaming services.
Hulu earns revenues through both subscription- and advertising-based revenue models. The basic subscriber plan to Hulu starts at $7.99 a month and includes unlimited access to Hulu’s library with mobile compatibility. The billing plan displays Hulu’s double dipping revenue model as subscribers are still subject to advertisements on the shows they are streaming. The commercial free option is available to subscribers at a monthly fee of $11.99.
Earlier this year, Hulu reported that it had a subscriber base of 12 million users, compared with 9 million a year ago. It may be a fast growing number, but it is still a comparatively modest number to Netflix’s 47.5 million US-based subscribers and 86.7 million global subscribers.
Hulu does not report detailed financials. Analysts estimate that with its current user base, Hulu is probably trending at revenues of $2 billion for the current year with more than 57% of this revenue coming from subscriptions and the remainder from advertising. By the next year, J.P. Morgan’s researcher estimates revenues for Hulu to grow to $2.4 billion. Profits are still a dream for Hulu, which appears to have amassed $1.8 billion in losses so far. Credit Suisse’s researchers project Hulu to turn profits of $2.2 billion annually by the year 2020.
Hulu is venture funded so far with $683 million in investments from investors including Providence Equity Partners, The Walt Disney Company, and Time Warner. Time Warner was the latest media group to invest in Hulu. Last month, Time Warner invested $583 million in Hulu for a 10% stake, amounting to Hulu’s valuation of $5.8 billion.
Hulu’s Expansion Plan
Hulu plans to grow its user base and revenue base through the launch of new services and content. It already has tie ups with its network partners to allow streaming of TV serials a day after the release of the content on the television. It is also working on the launch of a new live streaming service that is estimated to cost around $40 a month. The service will be delivered as part of its tie-ups with cable channels including CNN, TBS, TNT, Cartoon Network, and Turner Classic Movies. Hulu will offer a cable-like bundle to subscribers to allow streaming of these channels by early 2017. Analysts expect the service to attract as many as 20 million subscribers by 2020. Also with Time Warner as part of the investors now, Hulu has the unmatched ability to stream cable shows from all major networks.
Additionally, Hulu is also investing in content development. But it is yet to deliver a box office smash hit like Netflix. It claims that it is working with major Hollywood producers for upcoming releases and is hopeful that buzzworthy titles will appear soon enough.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
Photo Credit: Garrett Heath/Flickr.com
This segment is a part in the series : Billion Dollar Unicorns
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