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How Fox Assets Could Benefit Disney and Hulu

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Hulu is posting losses

The Internet streaming service provider Hulu grew its subscriber base and advertising revenues in 2018. While Hulu’s advertising revenue increased 45% year-over-year to nearly $1.5 billion, its subscriber count reached 25 million at the end of 2018. However, Hulu, which is jointly owned by Walt Disney (DIS), Comcast (CMCSA), 21st Century Fox (FOXA), and AT&T (T), is still reporting losses. According to the SEC filings of Hulu’s owners, 2018 losses are expected to touch nearly $1.5 billion, much higher than the $920 million in 2017.

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Investment in premium content

Hulu is reporting huge losses, as it is significantly investing in original content and licensed series to grow its subscriber base amid competition from streaming giants like Netflix (NFLX), Amazon Prime Video, and other live TV services. Hulu’s shows cater to both adults as well as kids. Hulu’s dark originals such as The Handmaid’s Tale and Castle Rock have been very popular among adults. Hulu’s offering blends live TV and a large on-demand selection including exclusive and original series.

Disney-Fox deal would help Hulu boost its portfolio

Disney’s acquisition of the media assets of Fox, which is expected to close in 2019, would give the former a controlling 60% stake in streaming service Hulu, which is currently 30%. The acquisition of Fox’s assets will not only add FX and Fox television studio programming to Disney’s content portfolio and boost its revenues but will also help expand Hulu’s premium content to other international markets. Hulu will also complement Disney’s direct-to-consumer streaming line-up. While Disney has plans to target viewers with Hulu content, the upcoming Disney+ service will be aimed at kids and families.

Notably, Disney’s revenues of $15.30 billion exceeded the revenue expectations of $15.14 billion in the first quarter of fiscal 2019, but it was almost flat from the year-ago quarter.

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