Hulu readies for IPO... still not making a profit. | Hacker News Reader

Hulu readies for IPO... still not making a profit.

nytimes.com

I find it hard to see why anyone would view Hulu as a worthwhile investment, at least other then something to ride up post IPO and then get out quick. Its entire value derives from the content it offers - content that it will never own, and will forever remain beholden to the content providers for.

"Pssst! Wanna buy part of our company and share in the profits? But only a little bit of the profits of course, because you'll be using our content and have to license it from us. And we'll gradually squeeze your profitability down to a negligible amount over the years, because it's our content and that's what we've done in every market. And when the cable companies get pissed that people are switching to Hulu, we'll likely start blackouts/delays to keep them happy and devalue your service. Whaddya say?"

Leading content providers (News Corp, NBC, ABC/Disney) have stakes in Hulu. Therefore their incentives are aligned and it is unlikely that Hulu will be cut from the content. Quite the opposite, it can be given an exclusive content access (earlier, better quality, behind the scenes).

Your argument can be applied in the same way to other companies: Netflix (movies), Amazon (books). Being a distributor (and thus depending on producers) is not necessary a business killer.

Cable companies can not directly discriminate Hulu traffic due to net neutrality principle. And in the future most of the traffic will go through wireless carriers.

> Leading content providers (News Corp, NBC, ABC/Disney) have stakes in Hulu.

It's also part of the problem from an investor perspective. Hulu is pretty much never "profitable" but that completely ignores the fact that its major stakeholders get a huge chunk of its revenue since it's their content. I can't find the article now, but one stated the content providers receive upwards of 60% of Hulu's revenu. So Hulu doesn't make a "profit" but basically everyone that owns a stake in it is getting a good return on investment. That conflict of interest with the other major stakeholders would give me major pause about buying into Hulu.

EDIT: I think this is the article I recall reading http://www.businessinsider.com/henry-blodget-hulu-turns-prof...

And the numbers there are different (and probably a bit better) than what I stated above, but the general point stands that you're buying stock in a company where the major stakeholders are getting a return regardless of whether Hulu turns a profit or not.

There are a lot of benefits in this model. If you can start getting subscribers and cash coming in you typically end up with high retention rates and low capital investment requirements. Eventually Hulu could throw off a lot of free cash flow which would be good for owners.

Liberty Media Starz is a good example. They successfully generate a lot of cash and are now on sound enough footing to start creating some of their own content. They just grabbed Chris Albrecht who was behind HBO's original content push. Plus, with this Netflix / EPIXHD deal, Starz is likely to have their contract with Netflix re-negotiated at a much higher price and benefit.

That's no different than something like DirectTV, almost all radio stations and many cable TV stations. Also, who says Hulu can't start financing made for web shows?

"But a revision to comScore’s methodology sent Hulu’s viewership numbers plummeting, to 24 million in June from 43.5 million in May"

Is that a revision to methodology, or just an expected drop in users during the lull between seasons? I know I haven't been on Hulu since the season finales of my shows...

Are there any recent successful tech IPOs where the company wasn't turning a profit at the time? Tesla's the only one that comes to mind, but it's a somewhat unusual case. Everyone else I can think of in the past few years was turning a profit when they went public (e.g. VMWare in 2007, Rackspace in 2008, Skype filed just recently). On the other hand, it's possible YouTube could've gone public even while bleeding money if Google hadn't bought them, so perhaps Hulu's similar.

This line struck me as odd: "These people were granted anonymity because the discussions are still private."

I think after the whole Judy Miller and similar scandals the NYTimes has a policy of always disclosing the reason why anonymous sources are anonymous, even if those reasons are a bit pedantic.

Old Media: "Newsflash! Certain categories of so-called 'New Media' remain unproven as business models!"

What are you trying to say, NYT? ;)

They are going to do an IPO with content that they don't even control well enough to provide what they say you will get when you pay...

I like Hulu a great deal but I have had a Plus account for 2 days now and nothing that I wanted to watch (older shows where they say they offer all of the seasons to Plus members) have the seasons as promised.

An easy one is Heroes, on hulu.com/plus they say you get all 4 seasons of Heroes but go to http://www.hulu.com/heroes wiht your plus account and only the last 5 episodes of season 4 is there. Not that I want to watch this series but it should be there with my super-duper new plus account that I am logged into now with and it shows on my profile that I have paid.

Sometimes it feels like it's 1999 all over again...

Call me cynical, but it perhaps the equity owners want to cash out before the company kills itself with subscription services.

Hulu's special content relationship with old-line broadcasters is a blessing and a curse. That's powered Hulu's success so far... but might also cap Hulu's upside, because of the conditions content-providers impose, and the chance providers will defect to run their own web services. (The duration and details of current deals should be an interesting part of the IPO prospectus.)

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