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Can Hulu Help Disney Return Its Studio Business to Growth?

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Studio revenue fell

Hulu has committed to purchasing more content for its video streaming service from the Walt Disney Company (DIS)

A deal reached early this month shows that Disney’s Marvel Studios will produce four new animated series for Hulu. The development could be a boost for Disney, which recorded a 27% year-over-year revenue fall in its Studio Entertainment segment in its first quarter of fiscal 2019, which ended in December 2018. Its Studio Entertainment revenue was $1.8 billion in the quarter.

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Disney’s content deal with Hulu comes at a time when it’s set to become the majority shareholder in the video streaming service. Disney already owns 30% of Hulu, and it’s in the process of doubling that stake by purchasing 21st Century Fox’s (FOX) 30% stake in the business. Disney has also committed to supplying Hulu with new content at a time when it’s pulling its movies from Netflix (NFLX), a fierce Hulu competitor. Hulu boasts 25 million paying subscribers across the United States compared to Netflix’s 58 million.

Pursuing opportunity created by cord cutting

Even as it’s set to take control of Hulu, Disney is gearing up to launch its own direct Netflix competitor later this year. Customer departures from traditional pay-TV services in the so-called cord-cutting wave are fueling growth in the digital subscription video market, and the opportunity has caught the eye of many legacy media giants. AT&T (T) and Comcast (CMCSA), the two other shareholders in Hulu, are preparing to launch new digital video services in the coming months or the next year.

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