Is Hulu Ready to Go Public?
Hulu wants to raise more capital in order to add shows to its subscription service, Hulu Plus, according to Reuters. The service charges $9.95 per month for access to more videos and also gives subscribers the ability to view content on more devices. Aside from Hulu Plus, the site also brings in revenue via advertising to companies like Visa (V), McDonald's (MCD), and Wal-Mart (WMT).
Cost of TV Show Licenses is Substantial
But the cost of the licensing agreements needed to keep all these subscribers happy can run into hundreds of millions of dollars. Netflix, which posted a profit of $43 million on revenue of $520 million last quarter, said in its earnings statement that it had accumulated more than $200 million in license obligations for its content.
More competitors have come into the market as well. Apple (AAPL) and Amazon.com (AMZN) offer paid streaming services, large retailers like Wal-Mart have begun to offer video on demand and Google (GOOG) has announced plans to add a premium video service for YouTube, the world's largest video site. Most cable companies also offer on-demand videos.
NBC Universal, News Corp (NWS), The Walt Disney Company (DIS), and Providence Equity Partners own Hulu today, which would already seem to give it access to a huge pool of capital. And indeed, the company is also considering alternatives to an IPO, including raising more money from its existing investors, Reuters reported.
Those other options may not be enough to cover the company's plans. As it is, it's uncertain if even a $300 million IPO will give Hulu enough capital to ultimately beat out the competition in such a crowded -- and well-financed -- field.