Hulu is a go-to service for online TV. The company operates an ad-supported website Hulu.com that allows viewers to watch online video content -- TV shows, clips, and movies -- for free. Its premium service Hulu Plus allows streaming of full current and past season content on everything from TV sets and PCs to mobile phones and tablets for a monthly subscription fee. Hulu's programming is provided by more than 400 content companies, including network TV providers ABC, FOX, and NBC, as well as film studios MGM, Paramount, and Sony. Those that have advertised on Hulu since its launch in 2008 include McDonald's, Microsoft, Target, and Toyota.
Hulu.com attracts more than 26 million visitors a month. Users can choose from more than 2,600 current primetime TV shows on Hulu, as well as more than 1,000 movies and documentaries. While the site is primarily ad-supported, the company also has revenue-sharing arrangements with partner sites such as AOL, MSN, and Yahoo!, to which Hulu distributes content. Though these agreements helped the company diversify its revenue stream, they failed to significantly affect the bottom line.
In response, Hulu in 2010 started charging a fee for expanded access to content through its Hulu Plus service. Later that year the company made Hulu Plus available on TV sets to users of the Roku set top box in order to entice more subscribers to the premium service. Hulu Plus also distributes content to mobile devices, such as Apple's iPad and iPhone. In 2011 Hulu Plus reached 1 million subscribers.
The company faces a challenging media landscape in which consumers have a growing amount of options on where and how to access content. Hulu's main dilemma is that it is encroaching on the territory of cable networks, who are already losing subscribers that are migrating to the Internet for cheaper entertainment. Hulu owners such as Disney and News Corp. sell content -- the same content that is available on Hulu for free -- to rivals including Netflix and Apple; as a result, they are considering removing more free content from Hulu.
Such challenges are leading Hulu's owners to consider alternative strategies for the video site. The company may change its business model to eschew re-runs in favor of offering live TV channels and video-on-demand content to subscribers, much like a traditional cable network. Another option involved a possible sale of Hulu, but those talks ended in 2011 when Hulu owners decided there was more value in keeping the company.
Hulu was launched in 2008 as a joint venture between NBCUniversal (NBCU, parent of NBC) and News Corp. (parent of FOX). In 2009 Disney (parent of ABC) became a content partner and 30% shareholder. Disney joined the two other media firms and private equity firm Providence Equity Partners in the new ownership structure. Additionally, the 2011 mega-deal through which cable giant Comcast purchased a majority stake in NBCU from GE gave Comcast a 27% share in Hulu. – less