Monday, August 16, 2010

Would You Buy Hulu Stock?

Hulu and its partners are ready to go public and perhaps get some value confirmed on their investment. It seems an IPO is being planned and the public will have a chance to share the ride. But will it spell success? Not every IPO is successful and not every new technology is sustained. I mean whatever became of Prodigy.

Hulu has plenty of competition, from cable as well a other streaming services like You Tube, Netflix and Apple. It works with a single ad revenue stream and is trying to break into the subscription revenue model. It makes a little profit, but can that trend continue as cable expands into the streaming space. "An offering would be among the most significant developments for Hulu in its three-year history. Founded as a joint venture of the News Corporation, the Walt Disney Company, NBC Universal and the private equity firm Providence Equity Partners, Hulu aimed to be a counterweight to YouTube and other free video sites." But is it also being used as a chance for these partners to cash out their investment costs and, like the poker table, just work with its winnings.

It's a tough economy, so not every IPO is a winner. I like to dabble in stocks, but I am not a believer in Hulu. Ultimately, I believe its competitors are better positioned in the long run. And when multiple big ego companies own pieces, and you can bet they don't easily get along with each other, Hulu management must have a hard time getting anything approved by its partners. That slows down their ability to adapt quickly to change in an ever changing entertainment landscape.

Cable Wants Tablets

On Demand is extending past the TV set and cable may finally see the light. Keeping their customer entertained, whether tethered to the cable box or not, matters most. And the Tablet seems the next generation device that has caught cable's eye. "At least seven of the ten largest subscription-TV providers in the U.S. are building new tablet-computer applications that offer select TV shows and movies to their existing subscribers, often for little or no additional fee."

Companies like Comcast, Time Warner, and others are finally investing their time and dollars into the space. For example, "Comcast's new application will ask subscribers to log in, and include a search function to display all the available episodes of a show—whether they're on live TV, on traditional video-on-demand or available to watch on the iPad." Let's hope that this investment extends to other smartphone devices as well. Ultimately though, I like the idea of incorporating the sling technology that enables live TV to be viewed remotely. I can wait for on demand when I am back at home, but I like the idea of not missing live events when I'm outside the home.

Distribution companies will also be challenged by the content they are sharing outside the box. Content companies will be offering its content through its own web sites and through other means. It will lead to confusion, a huge supply with little help in search and expertise to lead a viewer through the vast number of offerings. It is hard enough to find things on a cable box, let alone on the web. Choice and convenience are important, but expertise is needed as well.