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Analyst: Hulu Plus to Reach 6 Million Subs By Year-End

13 May, 2013 By: Erik Gruenwedel

Subscriber base pales in comparison to Netflix’s 30 million, but advertising revenue keeps Hulu relevant

Hulu Plus, the subscription video-on-demand unit of Hulu.com, is projected to reach 6 million subs by the end of the year — double the tally reached at the end of 2012, according to Wedbush Securities analyst Michael Pachter.

The analyst believes Hulu Plus will add about 600,000 subscribers per quarter this year, compared with about 200,000 to 400,000 subs per quarter in 2012.

The yearly subscriber estimate, if reached, would still represent just 20% of Netflix’s sub base at the end of the first quarter (ended March 31). Subscription revenue is expected to top $425 million, which represents 40% of Hulu’s $1.06 billion 2013 revenue estimate.

Pachter says Hulu Plus likely grew its sub base in Q1 due to the platform’s accessibility via mobile devices. Hulu projects that mobile viewing will grow to account for 15% of videos consumed by its users during the next two years, and also reports that living room viewing (enabled by Internet-connected set-top boxes and smart TVs) now accounts for 29% of content consumption.

“Those wishing to access Hulu via mobile must become Hulu Plus subscribers,” Pachter wrote in a May 13 note. “Therefore, the rapid adoption of Hulu Plus in Q1 was likely driven by increasing access via a mobile connection, and could explain the acceleration in growth compared to Netflix.”

Meanwhile, Hulu Plus airs occasional ads when streaming programming. In 2012, Hulu showed about 17 billion video ads across both Hulu.com and Hulu Plus, according to Pachter. By comparison, Netflix generates $1 billion in quarterly revenue without ads.

“We estimate that in 2013, Hulu will grow ad revenue by about 32% y-o-y, growing its share of the $2.9 billion North American online video market to 21%,” the analyst wrote.

The snapshot comes as Hulu’s corporate owners — The Walt Disney Co., 21st Century Fox and NBC Universal — reportedly solicit third-party acquisition inquiries. Media reports suggest Yahoo, former Fox executive Peter Chernin, Amazon and private equity firm Guggenheim Partners — headed by former Yahoo CEO Ross Levinsohn — have all expressed interest in Hulu (and Hulu Plus).

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