Bloomberg News

Hulu Plans to Raise Money to Fund Expansion Into Original Shows

January 18, 2012

Jan. 15 (Bloomberg) -- Hulu LLC, the online TV service owned by ABC, NBC and Fox, is ratcheting up competition with Netflix Inc. with plans to raise money for an expansion into original programs.

Hulu will release “Battleground,” its first scripted show, on Feb. 14 and is weighing options to raise cash this year, Andy Forssell, chief content officer of the Los Angeles- based company, said in an interview.

“We have a very healthy business,” Forssell said. “When you have a healthy business, capital is not a problem. There are plenty of people who want to help.”

Hulu’s owners canceled a sale last year and put off plans for an earlier IPO. Exclusive programs will help the service compete with Netflix, which spends $2 billion a year on TV shows and movies, according to Bloomberg Industries research. Original programs account for about 5 percent of the content budget, Steve Swasey, a Netflix spokesman, said in an e-mail.

Hulu also ordered 10 new episodes of Morgan Spurlock’s “A Day in the Life,” a documentary series that returns in March, and a six-part documentary from Richard Linklater, director of “The School of Rock” and “Before Sunset,” called “Up to Speed” that starts later this year, according to a statement today.

The productions will be available to both free users and subscribers, Forssell said. Hulu Plus customers, who pay $7.99 a month, can watch shows in high-definition and access programs on mobile devices and TVs connected to video-game consoles. Nonpaying viewers can only watch on computers.

“We want to make great shows and get them out to the widest audience,” Forssell said. “We considered giving earlier access to Plus users and other benefits, but right now the aim is to get them out to as many folks as possible.”

Program Budget

Last year, News Corp.’s Fox division, one of Hulu’s owners, began restricting when new TV episodes become available to the service’s nonpaying viewers. Hulu Plus subscribers get access a day after broadcast.

Hulu was put up for sale in June and the auction was called off the auction in October. The service never went forward with a planned IPO in 2010 that envisioned a $2 billion valuation for the company.

The service will spend $500 million on TV shows and films in 2012, Jason Kilar, chief executive officer, wrote Jan. 12 on the company’s website. That’s up from $300 million the company projected a year ago, according to an April 2011 post.

The site, with more than 1.5 million subscribers, is signing up twice as many customers to its pay service as a year ago, Kilar wrote. He said 2011 revenue totaled $420 million.

‘Misfits,’ ‘Battleground’

Hulu’s owners include Walt Disney Co.’s ABC, Comcast Corp.’s NBC and Providence Equity Partners Inc., as well as Fox.

Hulu acquired rights to productions from the U.K. in June, including “Misfits.” Those shows often rank among the most- watched programs on the service and have helped recruit paying subscribers, Forssell said.

“Battleground,” from the director of Sony Corp.’s July 2012 release “The Amazing Spider-Man,” is a mock-documentary about a third-place political candidate and his staff trying to overcome rivals in Wisconsin.

Even if Hulu doesn’t raise money, the site will continue to add exclusive programming, such as the shows planned for the first half of the year, Forssell said.

“We generate more buying power than most people assume,” Forssell said. “We’re not just a subscription model. We’re not just an ad-based service. We’re both.”

--Editors: Rob Golum, Anthony Palazzo

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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