At its annual Upfront event for advertisers, Disney's Hulu, which operates only in the U.S. and Japan, announced that it now has over 28 million subscribers -- 26.8 million paid subs and 1.3 million on free trials. Though still well below the 62 million U.S. subs that Netflix (NFLX) had at the end of Q1, the number is up from 25 million as of early 2019 and 20 million as of the spring of 2018.
Hulu, which charges $6 per month for an ad-supported service and $12 per month for an ad-free service, also says its base of ad-supported viewers (not the same as subscribers) has grown by 43% to over 58 million. Likely to boost ad-supported Hulu viewing going forward: Its price was cut by $2 per month in January, and the company's bundling deal with Spotify (SPOT) was revised in March to let U.S. Spotify subs get the ad-supported version of Hulu for free.
Hulu's willingness to aggressively price and bundle its ad-supported service -- from the looks of things, Spotify is paying very little to bundle Hulu -- drives home how successful Hulu has been at monetizing the service via the sale of video ads that (like, say, YouTube's ads) can be targeted to a much greater degree than traditional TV ads.
The New York Times recently reported that the service produces more than $15 per month in revenue per subscriber -- a figure that implies ad revenue of more than $9 per month. The company's total ad sales rose 45% last year to $1.5 billion, and it's likely they'll grow strongly again this year.
And overall, though it's no Netflix or Amazon Prime-killer, Hulu, aided by a massive TV show library and a handful of successful originals, has carved out a niche for itself in the streaming wars. As a result, Disney's recently-set goal of having 40 million to 60 million Hulu subs by fiscal 2024 (it ends in Sep. 2024) looks achievable -- particularly if the company makes good on its plans to expand Hulu's international footprint.
The acquisition of most of Fox's assets left Disney owning 60% of Hulu, and a recent deal in which AT&T (T) is selling its 10% stake in the streaming service back to Hulu for $1.43 billion raises Disney's stake further. In addition, Comcast (CMCSA) , set to be Hulu's sole minority investor following the close of the AT&T deal, was reported last week to be in talks to sell its 30% Hulu stake to Disney.
While investors have naturally been paying more attention to the soon-to-launch Disney+ streaming service, Hulu's value to Disney shouldn't be overlooked, either.
