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Why Hulu Has Become Strategically Important for Disney

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Hulu’s new online television service

The Walt Disney Company (DIS) has noted that it continues to remain “bullish” on Hulu. As the OTT (over-the-top) landscape continues to change with new entrants, Hulu has changed its business strategy to withstand the increasing competition.

Early in May 2016, The New York Times reported that Hulu was developing an online TV service. The service is expected to be launched in 1Q17. According to a Wall Street Journal report, Disney’s ABC, ESPN, and the Disney Channel, Twenty-First Century Fox’s Fox News, FX, and regional sports networks are also expected to be available on Hulu’s online TV service. Hulu is jointly owned by Disney, Comcast’s NBCUniversal (CMCSA), and Twenty-First Century Fox (FOXA).

Why Hulu Has Become Strategically Important for Disney?

Disney referred to Hulu’s online television service at the company’s fiscal 2Q16 earnings call, stating that the new service from Hulu would put its service somewhere in the middle of expanded basic channel packages and “skinny” bundles like DISH Network’s (DISH) Sling TV.

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Disney further stated that when it comes to its content distribution strategy to OTT services like Hulu, “there are a number of our current distribution partners that are in the content ownership, content creation business. Most notably, Comcast and its purchase of NBCUniversal. So we don’t think that there is any negative impact whatsoever to us going into the business of distributing our channels.”

Always looking for opportunities to sell content

Disney further stated that when it comes to Hulu’s expected online TV service it “will have individual negotiations with them for our channels…But we like their strategy from a pricing perspective and in terms of what their ultimate consumer offering or consumer proposition is.”

Hulu’s ad-supported plan, priced at $8 per month, is at the low end among the current OTT services.

Disney also stated that considering the dynamic SVOD (subscription-video-on-demand) market, it will always have new opportunities to sell its content and will continue to invest in the creation of its IP (intellectual property).

Disney makes up 0.86% of the SPDR S&P 500 ETF (SPY). SPY has 3.4% of its total holdings in the computers sector.

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