Online video group Hulu tests appetite for IPO
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Hulu is considering plans for an initial public offering as early as this autumn, which could value the US online video company at about $2bn, people familiar with the plan said.
The joint venture between News Corp, NBC Universal, Walt Disney and Providence Equity Partners is hoping to raise cash to buy in content from a wider range of partners as rivals such as Netflix race to add more shows, these people said.
Hulu would not comment on Monday and one person familiar with the discussions said any IPO would depend on market appetite this year or in early 2011.
A Hulu IPO would be the largest offering for an online content company after Demand Media, which creates text and online videos by sifting through search engine data on consumer interests, filed IPO plans this month.
Hulu, led by Jason Kilar, is the second-largest online video site by traffic in the US after Google’s YouTube and has set itself apart with its offering of recently broadcast television programmes such as Glee and The Office.
The company generated about $100m in advertising revenue in 2009 but has given little detail on profitability, which could be a critical issue should investor appetite for new issues remain cautious.
Mr Kilar told Bloomberg TV this month that it was “net income positive”. However, Arash Amel, analyst with Screen Digest said he doubted it would make a profit this year, when he forecasts its advertising revenues will reach $210m to $220m, compared with about $600m from US broadcast networks’ websites.
Providence injected $100m into Hulu at its inception, of which it has about $50m left, but raising fresh capital is seen by Hulu’s backers as a more attractive method to bolster its video offerings than giving further equity stakes to new partners.
Hulu faces growing competition from Netflix, the DVD rental and online video company which last week struck a deal with Epix, a pay-TV joint venture between Viacom, Lions Gate and Metro Goldwyn Mayer, to increase its range of movies. Long-time holdouts such as CBS have shown some willingness to offer programmes to Hulu after it test-launched Hulu Plus, a subscription service for $9.99 a month.
The success of Hulu Plus would be key to investors’ interest, said Tuna Amobi, Standard & Poor’s analyst, who said a $2bn price tag looked “lofty” but not far-fetched. Fresh capital could accelerate plans for expansion in international markets, Mr Amel added.
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