×
You will be redirected back to your article in seconds

Hulu Losses Double in Q2 to $357 Million, as Disney Is Set to Take Control

Parent companies to invest additional $1.5 billion in streaming venture in 2018

Hulu’s cash burn has accelerated — its losses in the second quarter of 2018 more than doubled — as the video-streaming venture continues to step up its investment in content and technology to acquire new customers.

At this point, questions remain about what will happen next for Hulu once Disney gains majority control of the company, and how Hulu will find a path to profitability after an intense period of investing in growth.

In Q2, Hulu sustained a loss of about $357 million, double from the prior-year quarter of about $173 million. That’s based on Comcast’s 10-Q filing for the period, which said the streamer’s losses were “primarily due to higher programming and marketing costs.” Disney’s quarterly filing also cited increased content spending along with “labor costs, partially offset by higher subscription and advertising revenue.”

The Hulu parent companies don’t disclose revenue for the JV, but that’s clearly on the rise. Hulu had 20 million paying subscribers as of May, up 18% from the end of 2017. Of those, about 800,000 had Hulu’s live TV service, priced at $40 monthly.

With its costs going up, Hulu’s parents — Disney, Comcast/NBCUniversal, 21st Century Fox and Time Warner (now WarnerMedia under AT&T’s ownership) — have been pumping more money into the venture, with regulatory disclosures indicating they’re collectively putting in $1.5 billion this year. That would be up from $1 billion in 2017.

Comcast said it made cash capital contributions to Hulu totaling $227 million for the six months ended June 30, up substantially from $99 million in the first half of 2017. That’s consistent with Disney’s disclosure that it has invested $227 million into Hulu over the first six months of the calendar-year 2018, and has committed to make a total capital contribution of $450 million to Hulu in 2018.

On Disney’s Aug. 7 earnings call with analysts, CEO Bob Iger noted that as part of the deal with 21st Century Fox to acquire big pieces of the Fox entertainment assets, Disney will pick up Fox’s 30% share in Hulu to give the Mouse House a 60% stake in Hulu.

Hulu “will fit in very significantly to our app strategy,” said Iger. He’s previously said that in the mix of the rest of Disney’s direct-to-consumer streaming lineup, Hulu will be the “adult-oriented” brand, and the obvious destination for programming from the newly acquired FX and Fox television studio. Hulu already skews toward a grown-up audience with dark originals like “The Handmaid’s Tale” and “Castle Rock,” although it also has a robust slate of kids’ programming as well.

At some point, Hulu also might become part of a bundle that includes the Disney-branded streaming service, which is set to launch toward the end of 2019, and the premium ESPN+ sports package.

“If a consumer wants all three, ultimately, we see an opportunity to package them from a pricing perspective,” Iger told analysts this week. “But it could be that a consumer just wants sports or just wants family or just wants the Hulu offering, and we want to be able to offer that kind of flexibility to consumers because that’s how we feel the consumer behavior, what consumer behavior demands in today’s environment.”

But how big will Disney’s appetite be to keep plowing money into Hulu? Remember, Hulu is competing against Netflix — which itself continues to operate at a negative free cash-flow rate — as well as Amazon, which is investing in Prime Video as a way to yield more e-commerce purchases from Prime members. Hulu also is vying for subscribers in the “virtual” pay-TV arena against Google’s YouTube TV, AT&T’s DirecTV Now, Dish’s Sling TV and others.

Disney keeps demonstrating that it believes internet video is the way of the future (witness the $2.6 billion it spent to acquire majority control of BAMTech). Presumably Iger and Kevin Mayer, who is chairman of Disney’s recently formed Direct-to-Consumer and International business segment, are looking at Hulu as a long-term play with the sustained investment now paying off in the years ahead.

At some point, it’s possible that Disney will try to buy out the two remaining shareholders, Comcast (a 30% shareholder) and WarnerMedia (which owns 10%).

Worth noting: Comcast chief Brian Roberts was just beat out in a bidding was on the Fox deal by Iger; it’s not clear Roberts wants to give Disney a nearly total hold on Hulu. On the other hand, Comcast doesn’t have a strong direct-to-consumer video play itself right now (aside from NBC Sports and its Playmaker Media division), so it might want to exit a Disney-controlled Hulu to focus on its own OTT strategy.

More Digital

  • Netflix Logo

    Netflix’s India Content Head Swati Shetty Makes Exit

    Swati Shetty, who has headed Indian content operations at Netflix is to step down from the global streaming giant. She joined the streamer in August 2016 as director of international originals and acquisitions. The company said it is placing more emphasis on India and that the role should ideally be fulfilled form Mumbai, rather than [...]

  • Oculus Rift

    ZeniMax Agrees to Settle Facebook VR Lawsuit

    Game company ZeniMax Media said it is has agreed to settle litigation against Facebook, Oculus and individual executives alleging misappropriation of its virtual-reality technology. Terms of the settlement were not disclosed. ZeniMax sued Facebook in 2014 after Id Software co-founder John Carmack joined Oculus as chief technology officer. In the suit, which sought as much as $4 billion in damages, alleged [...]

  • Lisa Utzschneider - IAS

    IAS Taps Ex-Yahoo Sales Boss Lisa Utzschneider as CEO of Ad-Verification Firm

    Integral Ad Science (IAS), a digital ad verification company, hired Lisa Utzschneider as CEO and board member. Most recently, she was Yahoo’s chief revenue officer, exiting Yahoo with Verizon’s acquisition of the company last year. Utzschneider starts at IAS effective Jan. 7, 2019, replacing president and CEO Scott Knoll, who after eight years in the [...]

  • ‘Bumblebee’ Again Tops Studios’ TV Ad

    ‘Bumblebee’ Again Tops Studios’ TV Ad Spending

    In this week’s edition of the Variety Movie Commercial Tracker, powered by the TV advertising attention analytics company iSpot.tv, Paramount Pictures claims the top spot in spending for the second week in a row with “Bumblebee.” Ads placed for the sci-fi/action film had an estimated media value of $6.31 million through Sunday for 941 national [...]

  • Kathreen Khavari

    Kathreen Khavari Tapped by Refinery29 for 'Embrace' Comedy Pilot

    Refinery29 will begin production in 2019 on “Embrace,” a pilot from writing duo Kathreen Khavari (“Big Little Lies”) and Chuck Neal. “Embrace” will star Khavari as she comes up with an unconventional solution to prevent her Iranian immigrant parents from having to move back to Iran. Refinery29 bills the show, set in Khavari’s hometown of [...]

  • Outlander Season 4

    Starz Available for $5 a Month for Three Months Through the Holidays

    Starz is having an online holiday sale: The premium cable network is selling three months of its online streaming service for $5 per month, down from the regular price of $8.99 per month. The offer is available to new users who sign up until the end of December. Subscribers also get a 7-day free trial, [...]

More From Our Brands

Access exclusive content