Hulu has nearly $1 billion in fresh capital and a new leader. The question now becomes: What does it do with that?
The television-streaming service yesterday named Mike Hopkins, a Fox Networks distribution executive and a Hulu board member, to be its new chief executive. He comes aboard in the wake this summer of a decision by Hulu’s corporate owners, Walt Disney (DIS),Comcast (CMCSA), and 21st Century Fox (FOXA), to yank the company from the auction block and invest $750 million more to help the service increase its programming and bolster its technology offerings.
Hulu has moved beyond its “existential crisis” of whether to be a business supported by advertising or subscriptions and is now exploring ways to boost its reach and make its subscription model more durable, says David Bank, an analyst with RBC Capital Markets. One powerful way to do that would be to make itself a generic solution for cable operators that want to move their signals online. The technology needed to make Hulu a portal for pay-TV companies isn’t terribly complex: “[Hopkins] is the guy who can get the cable industry closer to adopting Hulu as a white-label TV everywhere service,” Bank says, calling the new CEO a “builder of bridges” from the content side. “Not every cable operator is interested or has the financial wherewithal to build a more robust Internet TV offering.”
Hulu’s revenue will approach $1 billion this year, Hopkins said in a note to Hulu employees that the company posted on its blog. A Hulu spokeswoman said he wasn’t available for an interview.
The cable industry’s migration of TV delivery to an Internet model is in its earliest stages, with the various efforts predominantly fragmented and proprietary thus far. Cable companies prefer their customers view television over the Internet, Bank says, because that helps drive broadband subscription growth. It also helps cable companies expand their product beyond the television to a variety of devices such as tablets and smartphones, giving customers greater access away from home. Broadband service is also one area where cable players can boost their profits by segmenting their Internet service offerings and charging more for higher speeds.
“I think that smarter minds than I in the industry have come to the conclusion that it’s imperative to have this kind of [Internet] initiative if you want to keep the economics of the ecosystem together,” Bank says. “Everybody wins.”
Hulu rival Netflix (NFLX) has been talking with cable operators to get its application added to their set-top boxes, the Wall Street Journal reported earlier this week. That would help Netflix get its programming more tightly integrated with TV viewers’ routine browsing. “We’re rapidly moving to an environment where every device in the home, including the big TV, will be connected to the Internet,” Charter Communications (CHTR) spokesman Alex Dudley told Bloomberg News.