- The Path
On Wednesday, Hulu CEO Mike Hopkins revealed a bunch of details about the company’s upcoming live TV service, a cable TV competitor that he said would cost under $40 a month.
Hulu’s live product will work much like a regular cable or satellite TV package, except that it will be delivered over the internet to your smart TV, phone, tablet, and so on.
The big question was whether Hulu’s product would be able to make a splash in a 2017 streaming TV market already crammed with the likes of AT&T, Dish, Sony, and perhaps YouTube and Amazon.
But based on the details Hopkins shared on Wednesday, Nomura Instinet analyst Anthony DiClemente said the answer is a probable “yes.”
In a note on Thursday, DiClemente wrote that Hulu’s new service would likely benefit from “strong subscriber growth,” and that he now sees upside to his estimate that it could get roughly 550,000 subscribers in 2017.
Here’s a rundown of the factors DiClemente sees leading to success for Hulu:
Attractive price. Hopkins said the service will be less than $40 a month, which is not a promotional price, unlike rival AT&T’s DirecTV Now initial release. This includes Hulu’s current $7.99 ad-supported on-demand product, which subscribers will get for free. “Though a final price has yet to be announced, we believe that at $39.99 month the service will be attractive to a large subset of Hulu’s current 10-12 million SVOD” – subscription video on demand – “subs, as the incremental cost will be $7.99 below the retail list price,” DiClemente wrote. A lot of content. Hulu announced Wednesday that CBS will be in the package, adding to Disney, Fox, and Time Warner. NBCUniversal isn’t on board yet, but Hulu seems to believe it will be. “In our view, the seamless integration of Hulu’s linear content with its SVOD product presents a compelling content proposition that is largely unmatched across [competitors],” DiClemente wrote. Hulu also says it will have the “vast majority” of local affiliate stations signed on – a problem that has plagued some competitors like DirecTV Now and Dish’s Sling TV. Industry-leading features. In his presentation, Hopkins highlighted the availability of a cloud-based DVR, something that DirecTV Now doesn’t yet have. Also, given Hulu’s expertise in the on-demand world, DiClemente said he’s confident Hulu Live “will provide subscribers seamless integration between live, on-demand, and recorded content.”
The question marks
Hulu will enter a bloodbath in the streaming TV market in 2017. Besides DirecTV Now, Sling TV, and Sony’s Vue, YouTube is working on its own package, and Amazon is rumored to be doing the same.
To compete, Hulu will have to nail two things: content selection and technical performance.
What remains to be seen is exactly how robust Hulu’s channel lineup will be.
While DirecTV Now initially offered a whopping 100-plus channels for $35 a month, that tier will begin to cost $60 a month on January 9. AT&T’s standard $35 option will include 60-plus channels. Can Hulu do better than that with its under-$40 tier?
The other big question for Hulu’s service will be technical performance. The two big names in the space, Sling TV and DirecTV Now, have been plagued with technical issues, as has Vue to some extent – though Vue reportedly has a much smaller subscriber base than Sling. There is room for Hulu to make a dent.
But the final question for Hulu is, with all the competition, can the company actually make money on this?
“Profitability remains a question mark,” DiClemente wrote. “Though Mr. Hopkins did not comment on a timeline to free cash flow profitability, he clearly ruled out the possibly of Hulu losing cash in perpetuity.”
That said, DiClemente said he sees the “aggressive” sub-$40 price point as a sign that “profitability is likely not a near-term event.”