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, Amazon.com'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.