Hulu Considers IPO, but Investors May Keep Away

The world's No. 2 online video streaming site Hulu is reportedly mulling an initial public offering (IPO) that could leave it richer by at least $2 billion -- provided it manages to attract enough investors.

According to sources close to the development, Hulu, which offers popular shows such as "Modern Family," "The Office" and "Glee," as well as movies, is keen on going public and is in talks with investment banks about how to proceed.

Hulu, which is owned by a clutch of companies including Walt Disney's ABC, News Corp.'s (Nasdaq: NWS  ) Fox Network and General Electric Co. (NYSE: GE  ) affiliate NBC Universal as well as Providence Equity Partners, is reportedly in need of cash to help it compete effectively against the likes of online movie rental service Netflix (Nasdaq: NFLX  ) and online video streaming site Google's (Nasdaq: GOOG  ) YouTube in the growing online media services market.

Hulu is the world's No. 2 video streaming site, with 1.17 million videos viewed in May, according to comScore. In comparison, YouTube boasted of 14.6 million videos viewed during the same month. However, the difference between Hulu and YouTube is that while the former offers mainly television shows and movies on its site, YouTube content is primarily made of short, amateur video clips.

Hulu's main rival is Netflix, which recently struck a deal with Epix pay TV channel for exclusive rights to stream movies online from the three studios that own Epix-Viacom, Lions Gate and Metro Goldwyn Mayer (MGM).

Despite growing in popularity over the years and reporting advertising revenue of about $100 million last year, Hulu is trying to find different ways of injecting funds to help it grow. For instance, last month, Hulu introduced a premium paid subscription service called Hulu Plus for $9.99/month for mobile devices, game consoles and television sets to complement its free ad-based service that allows people to watch televisions shows and movies on their PCs.

If Hulu's IPO is successful, it could be the biggest media and Internet IPO this year, analysts said.

The IPO will also help Hulu realign its business interests and settle conflicts among its top executives, analysts said.

To date, Hulu's network owners have sent out mixed signals about what they want to do with the site. While News Corp. chairman Rupert Murdoch and NBC Universal CEO Jeff Zucker reportedly do not agree with others that Hulu should provide free content, Hulu's other joint owner ABC has launched its own free iPad app that competes with Hulu's paid service.

NBC is also in the process of being integrated into Comcast, which doesn't like Hulu.

However, some analysts wonder whether Hulu's IPO will draw investors. The reasons are as follows:

One: Investors doubt whether Hulu Plus service will be a success. Though subscribers to the service can watch television shows and movies without being interrupted by ads, investors worry whether viewers would be willing to fork out $9.99 per month for something they are watching currently for free.

Two: Despite Hulu boasting of a strong line-up of shows and programs, popular broadcast network CBS Corp. and television channel Comedy Central are conspicuously absent.

Three: According to a New York Times report, currently the IPO market is fairly soft, and other possible stock offerings from General Motors and Toys R Us are likely to keep the investors satiated.

International Business Times, The Global Business News Leader

Walt Disney and Google are Motley Fool Inside Value choices. Google is a Motley Fool Rule Breakers selection. Walt Disney and Netflix are Motley Fool Stock Advisor recommendations. The Fool owns shares of Google. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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