Hulu goes for growth at all costs

Industry Contributor 6 May 2019 - 3 min read

Hulu goes for growth at all costs

By Paul McIntyre - Executive Editor

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Tags: Hulu, advertising, Netflix, Disney, Comcast, streaming, SVOD

Hulu has boosted paid-subscriber numbers 16.5% in the first four months of 2019 after dropping prices for its ad-funded product. The Disney controlled firm outlined major programming investment to double subscribers within five years and new ad formats to marketers at its NewFronts (Variety).

Key points:

28m total subscribers: 26.8m paid, remainder promotional
Subs boost follows price cut to ad-funded basic service from $7.99 to $5.99 plus bundling deals via Spotify and Sprint
Outpacing Netflix U.S. growth
Will bankroll two new Marvel series; new Nicole Kidman series 'For nine perfect strangers'; George Clooney adaption of Catch-22; new food and comedy slates
Launches "binge advertising experience" to serve contextual ads to binge viewers
Caps frequency and ad slot length; enables ads when viewers press pause, plus 'surprise' sponsor formats called 'Friends with Benefits'
"Ambition over next three years "is that half of Hulu's ad revenue will be from non-disruptive and nontraditional formats ... The centre of gravity for viewers has shifted." - Hulu head of ad sales Peter Naylor
Operating losses: CEO expects losses to peak at $1.5bn in fiscal 2019, profitability by 2024
Hulu currently only available in U.S., majority owner Disney planning international expansion, details under wraps

Hulu's numbers torpedo the idea that streamers won't tolerate ads. And Hulu's plan for up-ending ad loads and formats are likely to lead market behaviour, particularly with Hulu's eye on global expansion.

Disney (and Comcast, which owns 30%) have the appetite and balance sheet to fund an all out streaming war – which will play out as and when Hulu does go global.

Enabling contextual, targeted advertising to bingers could provide a massive opportunity for marketers. If Hulu can demonstrate effectiveness of its ad formats – and keep innovating, capping and decluttering, it could write a new blueprint for the broader sector.

Hulu made $1.5bn in ad revenue in 2018. eMarketer predicts it will hit $2.2bn in 2020, or almost 50% growth over two years. A global ad-funded service would dwarf those numbers.