So long, free Hulu.
The streaming service, which lingered directionless for some time, recently experienced a resurgence of sorts, as broadcast content powerhouse Time Warner Inc. (NYSE:TWX.DL) purchased 10% of Hulu.
This means Hulu is now owned by four of the most powerful names in cable TV today: Time Warner, Walt Disney Co. (NYSE:DIS), Twenty-First Century Fox (NASDAQ:FOX) (NASDAQ:FOXA), and Comcast (NASDAQ:CMCSA) (UNKNOWN:CMCSK.DL). Far more importantly, this development also sets the stage for Hulu to become the most serious threat to Netflix (NASDAQ:NFLX) and to Amazon.com's (NASDAQ:AMZN) streaming service Prime Video.
Sayonara, free Hulu
Earlier this week, Hulu announced it plans to officially end its free streaming service. However, rather than killing its free, ad-supported product altogether, Hulu will instead license the content to media colossus Yahoo!.
Yahoo!, which recently agreed to be acquired by telecom giant Verizon Communications, will operate the service under the product name Yahoo View. Hulu says it plans to transition its free streaming service to Yahoo! over the course of the next several weeks. The move likely ties into Verizon's broader mobile content ambitions, a la the Go90 mobile video platform it launched last year.
This is the latest phase in Hulu's continued metamorphosis into a paid streaming powerhouse, competing with streaming pure plays like Netflix and Amazon and so-called "skinny bundles" like Sony's (NYSE:SNE) PlayStation Vue and Dish Network's (NASDAQ:DISH) Sling TV. Thanks to its new cadre of owners, the service appears poised to execute on that idea perfectly.
From worst to first?
Founded as an online content syndication site in 2006, and officially launching its own site in 2008, Hulu came to market right as streaming video was truly gaining steam; for context, Netflix launched its streaming service in 2007. However, owing to the sometimes competing agendas at Disney, Twenty-First Century Fox, and Comcast, Hulu's progress seemed hamstrung at times, which left an opening for nimbler streaming players like Netflix and Amazon to deftly exploit.
Case in point: Hulu disclosed in meetings with advertisers earlier this year that its streaming service has grown from 9 million to 12 million subscribers year over year. That kind of growth sounds impressive until placed against the competition: At the same time, Netflix reported having over 77 paying million subscribers. Though Amazon doesn't disclose its user numbers, one research analyst pegged Prime Video streaming in the U.S. at roughly 21 million users at the start of the year -- the point being that Netflix and Amazon quickly eclipsed Hulu, despite their similarly timed launches.
Likewise, tech companies like Sony and Dish also beat content providers like Disney, Twenty-First Century Fox, Comcast, and Time Warner -- Hulu's owners -- in launching internet-based cable services. However, Hulu's recent movements signal that it could have the last laugh.
Given its well-positioned ownership, Hulu now seems like the only name in streaming today with the access to live content, hit network programming, and content archives to create a service that successfully marries a cable network with past video and TV streaming services. Hulu's four media-giant owners combined own the highly coveted ESPN family of networks, USA, Bravo, Fox News, CNN, FX, National Geographic, and many more. The ownership group also controls film assets including Pixar, Walt Disney Studios Motion Pictures, Marvel, Lucasfilm, Twentieth-Century Fox Film, and Warner Bros., among others.
This doesn't guarantee that Hulu's new over-the-top service will contain the best content its four owners have to offer. However, with the interests of Comcast, Disney, Twenty-First Century Fox, and Time Warner now all aligned around the success of a single streaming entity, the stage is now set for Hulu to emerge as the most powerful product in the booming market for streaming entertainment.
With large, established customer bases already in place, streaming giants Netflix and Amazon aren't likely to be "killed" as a result of Hulu's newfound resurgence, at least anytime soon. However, if Hulu manages to realize its big ticket potential, Netflix and Amazon will likely need to enhance or expand their own value propositions or face slower growth, or worse, even possible customer defections.
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Andrew Tonner has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com, Netflix, Time Warner, Verizon Communications, and Walt Disney. The Motley Fool recommends Yahoo.
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