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Everyone is fighting for Netflix.
Amazon, AT & T, Apple and the Walt Disney Company have spent billions of dollars creating or strengthening their own streaming networks to attack the giant on the ground. Some, like Apple and Amazon, are supposed to be aggregators – selling both original content and offering broadcasts such as HBO – making them similar to traditional cable providers. Others, like AT & T and Disney, have positioned themselves as services only selling their content, for the time being.
But Netflix remains the leader of the sector. The company has come a long way since its inception by sending DVDs in red envelopes. It added 7.8 million new customers until the end of March, according to the first quarter report released Tuesday, for a total of 148 million euros worldwide, of which 60 million to United States. Growth in the number of subscribers has, however, slowed further in the United States than elsewhere, in part because of higher prices and increased competition. The streaming service posted a $ 344 million profit on sales of $ 4.5 billion in the quarter ending March.
For the moment, however, Netflix is clearly beating rivals in terms of streaming: subscribers, display time and content library. But one is closer than the others: Hulu.
Hulu has long struggled to take her course because she has had to deal with several corporate overlords since her founding in 2007.
For much of its existence, it has had several owners: Disney, 21st Century Fox, Comcast and more recently Time Warner. The ownership of this digital outfit created by a committee has become less complicated in recent days.
When Disney officially ended its acquiring most of Fox last month, she became the majority owner of Hulu. Hulu got rid of another actor on Monday, when AT & T – who acquired Time Warner last year – resold to Hulu the stake that belonged to Time Warner. Now, Disney is the dominant owner and Comcast is the smallest element.
Hulu first made it known as the next day broadcaster of broadcasts from other networks. It began to change a few years ago, when he embarked on creating his own programming. In particular, it gave the green light to "The Handmaid's Tale", the first native streaming show that won an Emmy for the best drama series.
Although it may not generate much hype, Hulu is Netflix's closest competitor, despite some key differences between the two companies.
Almost stubbornly, Netflix sells one thing: a complete assortment of original and licensed programs and movies intended to appeal to almost every niche.
Hulu, on the other hand, offers three products that could better reflect the future of streaming. It offers a live television service that replicates a small group of cables at $ 45 a month; a video-on-demand service that sells for $ 12 a month without advertising (this one behaves almost like Netflix); and a streaming service with advertising that costs $ 6 per month.
The latter is Hulu's most lucrative business and indicates future earnings. Even if it charges $ 6, the service generates more than $ 15 per subscriber per month, due to the costly advertising sold against these customers, according to the same source. two people familiar with the company.
That would explain why Hulu lowered the price of the $ 2 ad service this year – and that could also explain NBCUniversal's interest in starting its own business. ad-based streaming network by 2020.
Roku, the maker of streaming boxes, is also experiencing rapid growth in its Roku channel, a free advertising-based streaming app. And in January, Viacom spent $ 340 million on PlutoTV, another advertising-based streaming provider.
Last year, Hulu cashed more than $ 1.5 billion in advertising, a 45% jump from the previous year. Randy Freer, its general manager, expects the online TV advertising market to reach $ 50 billion within three years.
"This allows Hulu to benefit from the prestigious brands in the digital video advertising market," said Freer at the Disney investor presentation last week. "Hulu does this with an audience-driven advertising experience, with fewer commercial interruptions, shorter commercial breaks, and more relevant ads."
Netflix and Hulu are not necessarily propositions for consumers. Many people pay for both.
Mr. Hastings does not anticipate that the new competition will harm Netflix's business, as consumers' appetite for streaming content still exceeds what is currently available or what will be available.
"Great competition makes you better," he said about new advertised competitors, Apple and Disney, when calling the company's results Tuesday. He added among all others: "There is a ton of competition out there, which is great for consumers and it's exciting for us."
While Netflix remains in the lead, a look at the numbers suggests that Hulu could prove to be a formidable rival. We will take a look:
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Evaluation: Hulu is worth $ 15 billion, Netflix, $ 157 billion. But it's not just about size, it's important to consider how quickly everyone has grown up compared to each other.
When Time Warner bought a 10% stake in Hulu in August 2016, it paid $ 583 million, a valuation of $ 5.8 billion. Nearly two years later, Disney consultants valued Hulu at $ 9.3 billion. This month, after selling its 9.5% stake for $ 1.43 billion, the valuation reached $ 15 billion. (Note: AT & T lost 0.5% of its stake while it was not investing continuously in Hulu, this small part went back to Hulu.) This means that Hulu's valuation has been multiplied by 2.6 in two and a half years.
Here is the kickoff: the value of Netflix was multiplied by 3.8 during the same period. But keep in mind that, as Netflix is openly traded in the public market, it has many more potential buyers at some point. Hulu is actually a private operation, with few buyers available. You have to ask yourself whether Hulu would be worth more if it were transformed into a separate publicly traded company, with Disney retaining a significant stake, or even a majority stake.
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The subscribers: By December, Hulu had 25 million subscribers, up eight million from the previous year, an increase of 47%. Netflix had 58 million contributing members in the United States at the end of last year, up 12% from the previous year. (Worldwide, Netflix had 139 million, an increase of 26%.)
Netflix's growth started to slow down – and clearly, compared to Hulu's.
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Business: Hulu and Netflix spend a lot of money. Hulu was a losing operation from the start. It should lose $ 1.5 billion this year and pretty much the same thing next year. But Disney said he hoped Hulu would start generating profits by 2023.
Netflix is making a profit in its books, but this is largely due to an accounting rule that allows it to account for some costs later on the line. It made a profit of $ 1.2 billion last year and is expected to generate more than $ 2 billion this year and $ 3 billion next year.
Netflix's appetite for content means that it must continue to spend a lot, resulting in what is known as negative free cash flow. There is more money coming out than entering – a difference that Netflix covers by borrowing even more. The company spent $ 3 billion last year and $ 2 billion the year before. But it will not last forever. The company said it expected to rely on its own revenue to fund its content from next year.
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