Hulu CEO Jason Kilar tells the Times that the beta version of Hulu served 5 million visitors in the last 30 days. That sounds great. But once you start looking at how the value of those visitors, you get a sense of just how difficult it will be for Hulu to succeed.
Jason doesn’t break out Hulu’s financials, so we’re going to have to do some guesstimating. Our assumptions:
- Hulu is selling ads at a $25 CPM, meaning they get $25 for every 1,000 views. (CBS says it’s getting a CPM of $20+ for its video).
- Each of those 5 million visitors watched two shows apiece, and saw four ads. That’s likely generous, given that only 40% of Web users who watch any video stream all the way through. But Hulu has good stuff, so we’ll give them the benefit of the doubt.
That’s $500,000 in total revenue per month, or $6 million per year. But Hulu’s content partners keep most of that; Hulu gets 20% to 30%, depending on whether the video runs on partner’s site, or at Hulu. Let’s assume that’s a 50-50 split between Hulu views and non-Hulu views, and that Hulu is keeping an average of 25% of the revenue it generates. That’s $125,000 to the NBCU/Fox JV, or $1.5 million a year.
Now remember that Hulu has significant bandwidth, marketing and overhead costs and that this is a business Providence Equity Partners valued at $1 billion. No one expects Hulu to be cash-positive at launch. And it’s certainly going grow now that the public can get their mitts on it. One SAI staffer today dumped his cable subscription and declared his an “all-Hulu” household. But as audiences scale, so do marketing and bandwidth costs. Can Hulu succeed? We don’t think so.
Business Insider Emails & Alerts
Site highlights each day to your inbox.