1 IPO I Want to See in 2012

Facebook's impending IPO (now scheduled for May 17) has taken on the sort of eagerly anticipated breathlessness usually reserved for the long-awaited pairing of a favorite onscreen duo. But pay too much attention to Facebook and you'll miss out on another company that's changing an industry. And it's one I want to see go public in 2012.

Streaming has been on everyone's radar this past year, with Netflix's (Nasdaq: NFLX  ) very public folly,'s (Nasdaq: AMZN  ) slow buildup of a television library and creation of a studio for new content, and Apple (Nasdaq: AAPL  ) ... well, when isn't Apple in the news?

And then there's Hulu, little private Hulu, which has been seen as the younger kid who wants to play with the grown-ups. Hulu's had its share of missteps: an almost-IPO in 2010, public rumors of a buyout in 2011, and revenues that missed a key revenue target (but not projected revenues).

And let's not forget Jason Kilar. The former Amazon exec who started Hulu was thought to be on the way out last year when he wrote a Jerry Maguire-like manifesto claiming old television was dead. It didn't please Hulu's owners, among them News Corporation and Disney. Taken together, it would be easy to dismiss the online streamer.

That would be a mistake.

Take a pause
Those missteps, which earned Hulu criticism, were actually strategic steps that helped the company's overall vision and bottom line. The possibility of a buyout, according to Kilar in a recent interview with All Things D, was merely an earnest attempt to carefully weigh every option for the Hulu team and its investors (and never meant to be public). The IPO, which was ostensibly to raise funds for new content deals, was put on hold as Hulu developed its subscription service, Hulu Plus. Unlike other streaming services that rushed products to market with spotty results, Hulu Plus was only rolled out after a careful beta period. And, while the initial cost of a Hulu Plus subscription was $9.99, it's currently $7.99, bucking another streaming trend.

Ready to play
Unlike Pandora (NYSE: P  ) , which has struggled with the dual-revenue-stream model and cannot seem to turn a profit over its royalty costs, Hulu's ad revenue and subscription revenue streams have sound footing.

Hulu Plus has 1.5 million paying subscribers, which accounts for approximately half of the business. Hulu reached the 1.5 million subscriber mark faster than any online or offline video subscription service (ahem, Netflix, cough) and it's growing at twice the daily rate as this time last year. Hulu Plus can be watched on everything from the Kindle to the Nook to the Xbox.

The content library is exploding; free content is up 40%, and the content available to paid subscribers is up 105%. It's just the beginning -- Hulu will invest half a billion in 2012, which can be done without raising additional capital.

And that 20% missed projection on revenue? Turns out revenue isn't down; it's up, by a staggering 60%, from $263 million to $420 million. That 20% miss was Kilar's personal projection based on current growth rates, not the company's projection of $408 million.

Hulu has one more thing that its competitors don't: a fully integrated, personalized social media platform. More than simply leaving comments, Hulu customers (free and paid subscribers) can chose advertising tailored to them, imbed clips into their blogs or social media accounts, interact with circles of friends on the Hulu site, and create or join various discussion threads about shows.

Kilar is notoriously tight-lipped about product rollouts and business strategy, but he's consistently public on one thing -- the television and film industry is changing. Hulu is leading that charge with customizable advertising, higher rates paid to content providers, and a wide variety of content. There's only so far Hulu can go while owned by major network stations, and it's the only streamer that has such limitations. In order for Hulu truly to fulfill its capabilities, it needs to break off and go public.

Hulu may not be public (yet) but two of its competitors just declared earnings, and made the Fool's list of "5 Stocks Investors Need to Watch This Earnings Season." You can download a copy on us; it's free for Fools.

Do you Hulu? Or are you a Netflix subscriber, an Amazon Prime member, or do you eschew streaming altogether? Let me know below.

Molly McCluskey owns shares of Pandora and Follow her @MollyEMcCluskey. The Motley Fool owns shares of and Apple. Motley Fool newsletter services have recommended buying shares of Netflix, Apple, and Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy.
 We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (2) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 27, 2012, at 1:35 AM, sliderw wrote:

    If Hulu's future is so bright, why is Providence cashing out its stake now?

  • Report this Comment On April 27, 2012, at 4:30 AM, XMFAlaska wrote:

    Thanks for your comment, sliderw. All of Hulu's investors, including Kilar, have the option of cashing out this spring. This is a set, previously determined date.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1872386, ~/Articles/ArticleHandler.aspx, 10/24/2016 11:30:46 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 hours ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:00 PM
AAPL $117.65 Up +1.05 +0.90%
Apple CAPS Rating: ****
AMZN $838.09 Up +19.10 +2.33% CAPS Rating: ****
NFLX $127.33 Down -0.17 -0.13%
Netflix CAPS Rating: ***
P $12.80 Up +0.16 +1.27%
Pandora Media CAPS Rating: **