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Can Hulu’s Growing Subscriber Base Pose a Threat to Netflix?

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Hulu faces competition in the streaming space

Hulu faces stiff competition from streaming giants Netflix (NFLX), Amazon (AMZN) Prime, AT&T’s (T) HBO Now, and others. Hulu also competes with pay-TV companies that have rolled out their own streaming services, such as AT&T’s DIRECTV NOW and Dish Network’s (DISH) Sling TV.

Therefore, to compete with digital players in the streaming space, Hulu is focusing on adding subscribers by investing in original content. The company has also added many popular TV shows to its offerings, which has boosted its number of subscribers. At the end of 2018, Hulu reportedly had a subscriber base of ~25 million, higher than the earlier expectation of 23 million–24 million made by CEO Randy Freer last month.

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Hulu’s and Netflix’s spending on original content

Hulu has only a few original series, which include hits such as The Handmaid’s Tale and Castle Rock, compared to Netflix, which reportedly planned to spend ~$13 billion on new content in 2018 to roll out 1,000 original shows and movies and has plans to increase that amount in 2019. Hulu reportedly spent ~$2.5 billion on content in 2018, the same as in 2017. According to the Diffusion Group, Netflix, Hulu, and Amazon Prime are expected to spend $10 billion annually and triple their combined investments in original shows by 2022.

The Walt Disney Company (DIS) will own a larger stake in Hulu after the completion of its acquisition of the media assets of 21st Century Fox. This development could further challenge Netflix. Disney is also set to launch its Disney-branded direct-to-consumer business in late 2019, which could raise further concerns for the streaming giant. AT&T’s WarnerMedia is planning to release its over-the-top streaming service this year.

Nevertheless, Netflix is still expected to remain the king of original content. According to Statista, the projected number of subscribers for Netflix is expected to reach 65 million in the United States by 2020. Other streaming services HBO Now, DIRECTV NOW, Sling TV, and PS Vue are expected to have 5.6 million, 5.5 million, 3 million, and 0.5 million US subscribers, respectively, by 2020.

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