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Hulu Changed Its Strategy, but Can It Compete with Netflix?

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Hulu’s recent initiatives

The OTT (over-the-top) landscape continues to change with new entrants, and 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 launch in 1Q17. According to a Wall Street Journal report, The Walt Disney Company’s (DIS) channels and Twenty-First Century Fox’s (FOXA) Fox News, FX, and regional sports networks are also expected to be available on Hulu’s online TV service.

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Disney stated on the company’s fiscal 2Q16 earnings call 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 is jointly owned by Disney, Comcast’s NBCUniversal (CMCSA), and Twenty-First Century Fox (FOXA). As the chart above indicates, Hulu’s ad-supported plan, priced at $8 per month, is at the low end among the current OTT services.

Hulu’s bid to rise to the challenge of increasing competition

Late in April 2016, Mashable reported that Hulu had 3,800 movies in its film catalog as of late March and that it continues to expand its movie catalog. Early in April 2016, Hulu became available to Cablevision customers in New York as a pay-TV channel through Cablevision Systems’ (CVC) Optimum set-top boxes.

Currently, FOXA is focusing on Hulu’s subscriber growth in the United States. Hulu has also started offering an ad-free premium plan priced at $11.99 per month. It remains to be seen how well this plan will be received. Netflix’s (NFLX) ad-free subscription plans average $10 per month.

FOXA is also experimenting with reducing its advertising load for Hulu using TrueX technology. About 80% of Hulu viewers choose to engage with ads for 45 seconds before starting a show.

Netflix makes up 0.24% of the SPDR S&P 500 (SPY) ETF.

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