Hulu, the rapidly growing hub for online television and movies, aims to go public through an offering that could value the company at more than $2 billion, according to people briefed on the matter.
In recent weeks, Hulu executives have begun talking to investment banks about pursuing an initial public offering as soon as this fall, these people said. These people were granted anonymity because the discussions are still private.
Such a move would be one of the most prominent media offerings this year, building off Hulu's success in streaming popular shows like “Glee” and “Modern Family”.
But despite its status as a big player in online video, the company makes little in the way of profit.
In May, it reported taking in more than $100 million in revenue last year, though it added that it was on track to make that amount again by the middle of this year.
It plans to add a $9.99-a-month subscription service soon alongside its core advertising supported business. Analysts say the move could build its strengths against rival video-streaming services like Netflix and a rumoured update to Apple TV from Apple.
An offering would be among the most significant developments for Hulu in its three-year history. Founded as a joint venture of the News Corp., Walt Disney Co., NBC Universal and the private equity firm Providence Equity Partners, Hulu aimed to be a counterweight to YouTube and other free video sites.
YouTube still unprofitable
YouTube was bought in 2006 by Google for about $1.65 billion and has remained the undisputed leader in online video, with about 144.5 million viewers in June, according to comScore, the measurement company. Yet YouTube has been unprofitable since its acquisition, though analysts predicted this year that the service would turn a profit in 2010.
An initial public offering by Hulu is by no means a guaranteed success. Several major initial offerings are in the works, including those of General Motors, the hospital operator HCA and Toys “R” Us.
With the market for IPO's widely regarded as soft, it was unclear how a Hulu offering would fare, and there was some concern in the marketplace that a potential stock sale by GM particularly would soak up a large part of investor demand.
Other online media companies are also testing the IPO markets, notably Demand Media, a publisher of articles and video based on search engine inquiries. Demand Media's offering also faces questions about its prospects, given the company's string of operating losses.
Led by Jason Kilar, a former Amazon.com executive, Hulu has grown to become one of the biggest sources of online video on the Web. It features content from most major TV networks — CBS and CW are two exceptions — and several movie studios like MGM and Lions Gate.
But Hulu is still confronting big questions about its prospects. The company has long been believed to be second only to YouTube in terms of online viewers. But a revision to comScore's methodology sent Hulu's viewership numbers plummeting, to 24 million in June from 43.5 million in May.
Hulu appears to be making big strides in improving its attractiveness to advertisers. The service served up more than 566 million ads in June, according to comScore, the highest among online video properties and more than double what comScore measured for YouTube.
Still, Hulu's powerful content providers have pushed the company to offer a more traditional subscription model, concerned that its ad-supported business is not generating enough revenue. This summer, the company unveiled Hulu Plus, a $9.99-a-month service that would give customers access to full seasons of TV shows and would make videos available on devices like the iPhone, iPad and Blu-ray players.
That decision may help lure back valuable content providers like Viacom, which withdrew popular shows like “The Daily Show” and “The Colbert Report” in March.
Analysts have questioned how many users were willing to pay for Hulu alongside their cable or satellite subscriptions, and its ability to square away all concerns from potential business partners about its business model. — © New York Times News Service