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How Important Is Hulu for Disney?

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Hulu subscribers

Hulu, a provider of Internet streaming services, had more than 20 million subscribers as of May 2018, up 18% from the end of 2017. Hulu subscribers are spread across Hulu’s various service tiers, including its core ad-supported service, Hulu with No Commercials, and Hulu with Live TV. Of its 20 million subscribers, ~800,000 have Hulu’s live TV service, priced at $40 per month.

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Investments in Hulu

Amid rising costs and thereby losses, Hulu’s holders—Disney (DIS), Comcast’s (CMCSA) NBCUniversal, Twenty-First Century Fox (FOXA), and Time Warner (now WarnerMedia under AT&T’s (T) ownership)—have been pouring more money into the joint venture since Hulu is consistently investing in acquiring new and original shows. These owners are putting up $1.5 billion this year, 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 in Hulu in the first six months of 2018 and has committed to making a total capital contribution of $450 million to Hulu in 2018.

Disney’s acquisition of a stake in Hulu

Disney, which holds a 30% share in Hulu, is acquiring some assets of Fox, including a 30% stake in Hulu. The acquisition will make Disney a 60% owner of Hulu. The deal will boost Disney’s direct-to-consumer strategy. The company has already launched ESPN sports streaming service and is planning to roll out another Disney-branded streaming service in 2019.

It remains to be seen if Disney will buy out the rest of Hulu from the two remaining shareholders—Comcast with a 30% share and WarnerMedia with a 10% share. Disney thinks Internet video will drive the future.

There is a growing number of people trending toward video streaming services. As you can see in the above chart, the SVOD (subscription video on demand) market has been developing rapidly and is expected to touch $108.6 billion by 2026, according to Future Market Insights.

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