The New York Times reports rapidly growing online television and video site may be gearing up for an Initial Public Offering. According to “people briefed on the matter,” the offering could value the company at around $2 billion.
According to those involved, who shall remain anonymous as talks get underway, Hulu executives have already been discussing a public offering with investors and we could see the IPO as early as this fall.
Despite how insanely popular the site is, Hulu is in a difficult position. The site simply doesn’t turn enough profit. This results in content providers pulling content, unhappy with their investment. Hulu then loses viewers, as we say when The Daily Show and Colbert Report were pulled from the site.
Because advertising revenues alone are not hitting the mark, Hulu launched Hulu Plus. This is a $9.99/month subscription plan is supposed to allow users to see a broader range of content, gaining access to full seasons of many popular shows. In addition, these premium users can get access to Hulu on almost any device, including iPads, smartphones, laptops, and internet-enabled TVs.
While this additional stream of income seems like the next logical step, Hulu has stiff competition in the online subscription arena. Namely, Netflix offers a $9.99/month plan which includes a DVD as well as unlimited access to a huge collection of movies and TV shows that you can watch instantly online via multiple devices.
Hulu was founded 3 years ago as a joint venture between the News Corporation, the Walt Disney Company,NBC Universal and the private equity firm Providence Equity Partners. Their goal was to compete with YouTube and other free video sites. YouTube remains the king of online video with 144.5 million viewers in June, but has also struggled in turning a profit. Hulu’s numbers dropped to 24 million in June from 43.5 million in May.
Part of Hulu’s struggle may be that they simply don’t have enough content, while YouTube can to leverage user-generated content. An IPO would be the most significant event in Hulu’s lifetime, but it remains to be seen if it will be enough to turn things around. As the NYT states, the IPO market is “widely regarded as soft” and offerings from companies like GM could thwart Hulu’s attempts at a successful IPO.