Hulu Parents Pump $1.5 Billion Into OTT Bet

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As Hulu expands its content, marketing — and losses — owners of the streaming service are stepping up their investment.

Based on recent Securities & Exchange Commission disclosures, Comcast/NBCUniversal, The Walt Disney Co., 21st Century Fox and the newly christened WarnerMedia will plunge $1.5 billion into the joint venture this year, up from $1 billion in 2017.

Meanwhile, like its streaming competitors, Hulu faces mounting losses. Based on a Comcast second-quarter 10-Q filing, it’s estimated that Hulu lost $357 million just in Q2, more than double the $173 million lost in the same period last year, according to reports in Variety and the The New York Times.

Hulu representatives declined to comment. However, an individual close to the company said the estimates “aren’t out of line.” Hulu spent about $2.5 billion on content in 2017, compared to $6 billion by Netflix. Some of the big bets have paid off. Hulu received a total of 27 Emmy nominations last month; of those, 20 went to The Handmaid’s Tale.

At CES, Hulu CEO Randy Freer discounted the originals arms race: “Way too much is thrown around about $8 billion,” he said during a keynote, referring to Netflix’s content budget. “Hulu has the access to $20 billion to $30 billion worth of content.”

The executive familiar with Hulu also advised looking beyond the most oft-stated cause of its spiking negative cash flow — its burgeoning content spend amid the original series arms race with Netflix.

As it has launched a live streaming service, and grown its subscriber base from 12 million at the end of 2016 to 20 million as of May, the joint venture has spent aggressively not just on content, but also on such areas as ad tech and marketing.

The figures don’t reflect the revenue made on the platform through licensing of shows and ad revenue sharing, which isn’t broken out.

Hulu’s ownership is in flux at the moment, with Disney set to pay $71 billion for a collection of Fox assets that include its 30% stake in Hulu, giving the company majority control. Disney is planning its own standalone Disney-branded OTT streaming service.

Netflix’s suddenly ebbing but still astronomical market capitalization — currently just more than $140 billion — seems to overshadow issues of negative cash flow. For now, Hulu’s investors seem content to finance the business as long as it continues to grow.