uploads///Digitalsmiths Q subscriber trends

What Disney Thinks of Hulu’s Proposed Online TV Service

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Nov. 29 2016, Updated 11:04 a.m. ET

Disney’s agreement with Hulu

The Walt Disney Company (DIS) continues to make its content available on streaming platforms such as Hulu. Disney is an equal stakeholder in Hulu, along with 21st Century Fox (FOXA) and Comcast (CMCSA). Earlier this year, Time Warner (TWX) bought a 10% stake in Hulu. According to a Variety report from early this month, Hulu entered into a content licensing agreement with 21st Century Fox and Disney for around 35 television networks, including Disney’s ESPN. The content will be available on Hulu’s online television service.

Hulu plans to launch an online television service in 1Q17. As viewers, particularly Millennials, increasingly prefer to watch content online, Disney is trying to take advantage of this trend.

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At Disney’s fiscal 2016 earnings call, the company was asked about more details regarding Hulu’s online television service. Disney didn’t disclose any more details regarding Hulu’s service. However, the company did state that considering the OTT (over-the-top) services from Dish Network’s (DISH) Sling TV, AT&T’s (T) DirecTV Now, Disney believes that the end result would be more choice for the consumer in terms of pricing and different choice of bundles.

Disney further stated that considering the popularity of watching content online, it is bullish about online television services. The company also stated that it believed that, in this scenario, there will always be new distributors for its content, including ESPN.

Rising trend of online television services

As the popularity of streaming services like Netflix (NFLX) grows, viewers are watching more and more content online. It’s cheaper to watch content online—for a viewer, a cable bill could be around $100 or more each month, while a basic plan for Netflix costs only around $8 each month.

According to a Digitalsmiths 2Q16 video trends report, and as the chart above shows, Netflix leads the OTT (over-the-top) market with a share of around 54%, followed by Amazon (AMZN) with a 24% market share. Hulu, Time Warner’s (TWX) HBO Now, and Shomi are smaller players in this market. However, with Hulu’s proposed online television service, the streaming market could be set for an upheaval.

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