Hulu Plus: No Threat to Netflix

Netflix (Nasdaq: NFLX  ) took a hit earlier today, after online video rival Hulu announced a subscription service with striking similarities to Netflix streams. But if you think Hulu will kill Netflix, you obviously don't use either service very much.

The new offering, Hulu Plus, offers several benefits over the free Hulu service, in exchange for a modest $9.99 monthly subscription fee. The content library is a bit bigger, video streams are coming at you in glorious high definition, and paying subscribers have the option to view Hulu's TV shows in a few new media formats. There's a Hulu Plus app for the Apple (Nasdaq: AAPL  ) iPad, and another for the iPhone and iPod Touch. Samsung also offers a software plug-in for the service on a range of connected television sets and Blu-ray players.

"You can start watching a show on your HDTV one night, pick up where you left off on your laptop at lunch, watch another chunk on the bus ride home on your iPhone, and finish watching in bed on your iPad," Hulu CEO Jason Kilar says. "The time to watch your favorite shows is any time you want."

Key differences
So far, so scary for us Netflix shareholders. Hulu Plus would seem to hover over the Netflix Watch Instantly service like a sword of Damocles, ready to sever the company's very lifeblood in one stroke. Thankfully, there's no reason to panic.

All Hulu does is TV shows. The Plus service offers full seasons and sometimes entire unbroken series of many popular shows, mainly pulled from the archives of the service's co-owners News Corp (NYSE: NWS  ) , Walt Disney (NYSE: DIS  ) , and NBC Universal, which still belongs to General Electric (NYSE: GE  ) . Hulu is the only place streaming some popular shows, and the Plus offering expands on that selection significantly. But that's just about all Hulu does. If you want to see a movie, Hulu will pretty much leave you cold.

The two services are largely complementary, in fact. Get the bulk of your streaming TV shows from Hulu, then switch to Netflix for long-form entertainment. Bear in mind, however, that Netflix also carries much of the same archival TV content, for both DVD and streaming. You'll find the complete runs of The X-Files, Buffy the Vampire Slayer, and Arrested Development, three titles highlighted in Hulu's announcement, on Netflix as well.

Hulu has some catching up to do when it comes to hardware support; Netflix already lives on all the platforms Hulu supports, and many more besides. And while Hulu's corporate backers certainly have deep pockets, the joint venture itself simply cannot afford the research and the licensing deals it would take to truly threaten Netflix in any meaningful way. Heck, the Netflix service has a deeper content library for less money than the Hulu equivalent, and Hulu still pads the new subscription service with potentially off-putting advertising. The financial model simply isn't there yet.

So if the market is discounting Netflix today on the basis of new competition, I wouldn't blame you for treating the price dip as a buying opportunity. Hulu Plus is no threat to Netflix.

Whether you agree or disagree with Anders' dismissive argument, you can advance your own theories about Hulu Plus and Netflix in the comments below.

Fool contributor Anders Bylund owns shares in Disney and Netflix, but he holds no other position in any of the companies discussed here. Disney is a Motley Fool Inside Value recommendation. Apple, Disney, and Netflix are Stock Advisor selections. Try any of our Foolish newsletter services free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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  • Report this Comment On July 01, 2010, at 10:37 AM, Hokie33 wrote:

    now if somebody would just come out with a service that charges you 8 or 10/month and shows all the sporting events that you can download and watch wherever whenever. I can kiss my cable/satellite and all those horrible channels goodbye!!!!!!!!!

  • Report this Comment On July 01, 2010, at 5:54 PM, Drewmate wrote:

    I agree with this analysis. I bought NFLX because I know that it is a good service, and is head and shoulder's above everyone in terms of getting the entertainment you want from them to you. Whether its their top notch recommendation algorithms, speedy DVD delivery, or the best streaming source in the biz, Netflix just beats the rest!

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