The post Here’s Why You Probably Won’t See a Hulu IPO Any Time Soon appeared first on Millennial Money.
If you’re waiting around to buy Hulu stock, you’d be better off focusing your attention on picking up shares of Disney. Here’s why investors shouldn’t wait for a Hulu IPO.
Video streaming services are everywhere these days, but when Hulu was founded back in 2007, it was still a novel idea. Netflix (NFLX) had just launched the streaming version of its service and a massive conglomerate of media companies created a joint venture to offer their own television content available for streaming.
What started as a collaborative effort with content from News Corp., NBC Universal, and eventually The Walt Disney Company (DIS) has evolved into essentially a Disney product.
Disney now has a controlling interest in the former joint venture and owns more than half of Hulu. That’s allowed Disney to bundle Hulu alongside the company’s other two video streaming subscriptions—ESPN+ and Disney+—giving Disney a huge opportunity in the massive $71 billion global video streaming market.
Hulu
What is Hulu?
Hulu is a video streaming service that offers customers multiple tiers of content, including a low-cost version with ads, an ad-free version, and live TV offerings. The company offers content from networks like ABC, NBC, FOX, and others, and has more than 39 million subscribers.
Expected IPO Date:
No IPO date
- Disney has a controlling interest in Hulu and owns 67% of the company.
- In the next few years, Comcast (CMCSA) will sell its 33% stake in Hulu, giving Disney full control over Hulu.
Bull Case
- Disney’s ownership of Hulu means that the video streaming platform has one of the most content-savvy media companies to ever exist at its helm.
- The company has become an asset to Disney’s content strategy, allowing it to offer more mature content that wouldn’t fit into the Disney+ service.
Bear Case
- As more media companies launch their own services, Hulu will face increasing video streaming competition.
- Hulu is still unprofitable right now and Disney doesn’t expect it to turn a profit for another few years.
Since its launch, Hulu has grown into a leading video streaming service with more than 39 million subscribers. The service looks different than it did when it first started—one noticeable difference being that it now offers a live TV option—and offers its own original content.
As Hulu has gained popularity among subscribers, it’s caught the attention of potential investors. But despite Hulu’s large presence in the streaming market, it’s unlikely that Disney would spin Hulu out as its own publicly-traded company any time soon.
This is why investors shouldn’t wait around for a Hulu IPO but how you can still benefit from Hulu’s popularity in the fast-growing video streaming market.
Top Hulu Numbers To Watch
- 39.4 million: The number of Hulu subscribers (as of Feb 2021)
- 67%: Disney’s stake in Hulu
- 33%: Comcast’s stake in Hulu until 2024, when it will sell its stake to Disney
- $11.3 billion: The market size for TV streaming ads
- $50 billion: The estimated size of the online TV advertising market by 2022
- $27.5 billion: Hulu’s valuation as of May 2019
- 2024: When Disney expects Hulu to start turning a profit
- $119.7 billion: The amount spent on video subscriptions in the United States
- 115 million: The estimated number of Hulu viewers by 2024
- $13.51: Hulu’s average revenue per use for paid subscribers
- $75.11: The average revenue per user for Hulu’s paid subscription plus live TV
Bull Case: Why Hulu is an Important Part of Disney’s Content Strategy
Hulu is already a leading video streaming service and Disney has the money and content know-how to make the service even stronger. Hulu isn’t profitable just yet, but Disney said back in 2019 that it plans for Hulu to be in the black by 2024.
It’ll get there by boosting paid subscriptions and through advertising. Disney has quickly become a streaming service subscription powerhouse, with the company taking about 26% of all over-the-top (OTT) subscription service revenue.
That’s far more than YouTube, with just 13% of the market, and Disney’s nipping at the heels of Netflix, which has about 31% of all OTT video subscription revenue, according to eMarketer data.
Aside from subscription revenue, Hulu offers Disney something that it can’t get through Disney+: advertising sales. While it’s unclear just how much Disney makes from advertising on Hulu’s platform, what we do know is that Hulu is helping Disney tap into a huge television advertising market.
The total video streaming advertising market is worth about $11 billion in 2021, but Disney estimates it could reach $50 billion in a few more years. Hulu’s average revenue per user (ARPU) for Hulu streaming video on demand (SVOD) and SVOD plus live TV streaming both rose in the most recent quarter thanks in part to “higher per-subscriber advertising revenue,” according to Disney.
Hulu’s ARPU for paid SVOD users increased from $13.15 to $13.51 in the first quarter of 2021, and SVOD subscribers with Hulu’s live TV option have an ARPU of $75.11, up 26% from the year-ago quarter.
Aside from subscription sales and advertising, Hulu also plays a very important role for Disney by allowing the company to offer content that doesn’t fit into its family-friendly Disney+ brand (which streams everything from classic Disney movies to National Geographic, Marvel Studios, and Star Wars content).
Additionally, Hulu allows Disney to offer live TV subscriptions, which is a growing market that consists of millions of cord-cutting Americans.
When you combine Hulu’s subscription sales, advertising opportunities, and its live-TV offering, it becomes clear why the subscription TV service is such an important part of Disney’s video content strategy.
Bear Case: How Hulu Could Lose its Edge
While you can’t buy Hulu stock right now, if you’re interested in any video streaming stocks, or want to buy shares of Disney, it’s worth taking a look at a few things that could hurt Hulu.
One of the main hurdles the company faces is increasing competition in the video streaming market. Here’s a quick list of some of Hulu’s competitors:
- Netflix
- Amazon’s (AMZN) Prime Video
- HBO Max
- AppleTV+
- YouTubeTV
- AT&T TV
- Philo
- FuboTV
- Peacock
That’s not the definitive list, but it’s a good example of just how many video streaming subscriptions compete with Hulu.
Smaller video streaming companies may not seem like a huge threat right now, but investors should remember that some of these services, like AppleTV+ (AAPL), Peacock, and HBO Max are just getting started.
American consumers have an unprecedented amount of video content available to stream and much of it is accessible without a long-term contract. This means that consumers can easily jump to a Hulu competitor, or even pause their service if Hulu doesn’t provide the type of content they want.
While Hulu is one of the leading video services with a live-TV option, that doesn’t guarantee the company’s success. Consider that in the fourth quarter of 2020, Hulu actually lost 100,000 customers who subscribe to its SVOD and live TV programming, ending the quarter with 4 million SVOD plus Live TV customers.
This was the first time Hulu has ever had declining subscriber numbers since Disney began reporting these figures in 2019.
The drop likely came from a $10 price increase that Hulu put into effect at the end of the year. And while losing 100,000 customers certainly isn’t detrimental to Hulu’s long-term growth plan, it could indicate that future price hikes could lead to subscribers hitting the cancel button again.
That could prove problematic, especially since Hulu isn’t profitable for Disney and may need future price increases to become so.
When Can I Buy Hulu Stock?
You can’t buy Hulu stock right now because the company isn’t publicly traded on any stock exchange. As of May 2021, there’s no indication that Hulu will become a publicly traded company.
Hulu is privately held by Disney and Comcast. Disney owns 67% of the company and Comcast has a 33% stake, which it has said it will sell to Disney in 2024.
What Is Hulu’s Stock Symbol?
Hulu is a privately held company, mostly owned by The Walt Disney Co., so it doesn’t have a stock symbol. Only companies that publicly trade on exchanges like the New York Stock Exchange or the Nasdaq have stock symbols. If Hulu were ever to go public it would then choose a stock symbol and an exchange on which to be listed.
Who Owns Hulu?
Hulu is owned by The Walt Disney Co., which has a 67% stake in the video streaming company. In 2019, Disney increased its stake in Hulu when it purchased 21st Century Fox. It also bought AT&T’s (T) 10% stake in Hulu in 2019, which AT&T had acquired when it bought Time Warner.
Hulu’s other major stakeholder is Comcast, which owns 33% of the company. Comcast said back in 2019 that it will sell its stake in Hulu to Disney in 2024. When that happens, Disney will own all of Hulu, but the media giant already has a controlling stake in the video streaming service right now.
How Much Is Hulu Worth Now?
Hulu’s valuation has increased rapidly over the past decade. Back in 2010, the company had an estimated valuation of just $2 billion. Six years later, after AT&T invested $583 million in Hulu, the company’s valuation spiked to $5.8 billion.
By April 2019, Hulu was worth $15.8 billion, but the company’s valuation spiked the following month to $27.5 billion, when Disney announced that it would buy Comcast’s stake in Hulu in 2024. Some estimates have Hulu’s valuation as high as $45 billion, but investors may not get another formal valuation figure until Comcast actually sells its stake in Hulu to Disney in the next few years.
Hulu isn’t Publicly Traded, So Should Investors Buy Disney Stock Instead?
It doesn’t look like Hulu will go public any time soon, and there’s little reason for Disney to sell the business to a competitor. So, for now, it looks like Hulu will remain intertwined with Disney’s content strategy.
What that means for investors is that if you’re looking for a stock that’s benefiting from the rise of on-demand video streaming, Disney may be just what you’re looking for.
Sure, there are companies that are pure-plays in the video streaming space, like Netflix, but Disney has already proved that its Disney+ and Hulu services are a winning combination.
At the end of the first quarter of 2021, Disney+ subscribers had increased 258% to 94.9 million and Hulu subscribers jumped 30% to 39.4 million. Not only is that fantastic growth from the previous year, but the company was also able to increase how much it earned from its Hulu customers as well.
Hulu’s ARPU for paid subscribers increased from $13.15 to $13.51 during the first quarter of 2021, and SVOD subscribers with Hulu’s live TV option have an ARPU of $75.11, up 26% from the year-ago quarter.
With Hulu’s current subscriber and ARPU growth and its leading position in live-TV streaming, it’s easy to see the long-term opportunity for Disney’s stock to benefit from Hulu’s position in the video streaming market.
It will likely take a few more years for Hulu to become profitable, but right now Hulu’s ability to grow its subscriber base and earn more from those customers is an asset for Disney’s content strategy.
Frequently Asked Questions
Is Hulu publicly traded?
No, Hulu isn’t publicly traded right now. There are currently no plans for the privately held company to go public. Disney owns 67% of Hulu right now and will acquire an additional 33% stake from Comcast in 2024.
Can you buy Hulu stock?
You can’t buy Hulu stock on any public stock exchanges because the company isn’t publicly traded. The Walt Disney Co. owns a controlling stake in the video streaming company.
Is Hulu owned by Disney?
Yes, Disney owns 67% of Hulu and will acquire the remaining 33% of the video streaming service from Comcast in 2024. Disney has had a controlling interest in Hulu since 2019.
The post Here’s Why You Probably Won’t See a Hulu IPO Any Time Soon appeared first on Millennial Money.