Hulu Became an Aggressive Competitor for Netflix in 2015
A Look at Major Events that Impacted Netflix in 2015
Hulu
In 2015, Netflix (NFLX) faced stiff competition from its competitors, including Hulu, Amazon (AMZN) Prime Instant Video service, and Alphabet’s (GOOG) YouTube Red. Hulu is an over-the-top (or OTT), ad-supported streaming service owned jointly by 21st Century Fox (FOXA), The Walt Disney Company (DIS), and NBCUniversal (CMCSA).
In 2015, Hulu started offering an ad-free streaming option at $11.99 in addition to the ad-supported option priced at $7.99. Hulu is also acquiring original content or exclusive SVOD (subscription video-on-demand) rights. In early 2015, Hulu acquired exclusive SVOD rights to a variety of programming from Turner Broadcasting (TWX).
In June 2015, Hulu also announced a partnership with CBS’ (CBS) Showtime network. Showtime offers ad-free Showtime TV shows, documentaries, movies, and sports for $8.99 per month on top of the $7.99 per month for a Hulu subscription.
Late last year, Hulu also renewed its agreement with Viacom (VIAB). Under the terms of this agreement, Hulu would be an exclusive SVOD platform to carry Viacom’s popular TV shows.
Epix Cable also moved to Hulu after its deal with Netflix lapsed in September 2015. According to the deal with Hulu, Hulu will stream popular Epix movies like Transformers: Age of Extinction.
Early last year, Hulu also acquired exclusive SVOD rights to 21st Century Fox’s (FOXA) popular series Empire. Under the terms of the agreement, all new episodes of Empire will be exclusively available on Hulu one day after the show’s broadcast on Fox.
As the chart above shows, Hulu offers a basic ad-supported subscription plan for $7.99 per month. It remains to be seen how well Hulu’s ad-free premium plan, priced at $11.99 per month, will be received since Netflix’s ad-free subscription plans average $10 per month. On the other hand, Time Warner’s HBO Now and Dish Network’s (DISH) monthly OTT offerings are slightly more expensive, at $15 and $20, respectively.
Why has Hulu become aggressive in terms of its strategy?
Hulu appears to be adopting a two-pronged strategy to differentiate its offerings from its competitors. In addition to looking at programmatic ad buying to better monetize its content, Hulu has also launched an ad-free premium plan for users who are tired of ads and who may move to competitors. Hulu is also trying to bring in new users by strengthening its offerings through original content.
Disney makes up 1.38% of the iShares S&P 100 Index ETF (OEF). For an investor interested in getting exposure to the Communications Services sector, OEF makes up 3.51% of that sector.
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