Video streaming site Hulu eyes $US2 billion IPO

Hulu.com, the popular video-on-demand joint venture between some of America’s biggest television networks, is reportedly planning a public offering for later this year and is hoping for a $US2 billion valuation.

The rumours come six months after the company’s international business director said Australia was one of the main targets for international expansion – if only we could get our broadband infrastructure up to scratch.

A Hulu IPO would signify a major shift for the entertainment industry, with a significant amount of internet users now opting to view television shows at their convenience, rather than when they are broadcast.

The New York Times reports Hulu is investigating the possibility of an IPO, which analysts say would be clear evidence of an emerging trend – internet users are now watching television on-demand instead of waiting for a dedicated broadcast time.

The site has not yet filed any official paperwork with the Securities and Exchange Commission. However, it has already publically stated the site earned over $US100 million in revenue in 2009, and could have already met that same figure in the first six months of 2010.

The site is certainly popular enough. According to ComScore, it counts 28 million unique visitors a month, with each user streaming an average of 158 minutes of video. But the real attraction is the advertising – it streams 783 million video ads every month, which is three times as many as YouTube.

It has over 200 content partners, including film studios, and television episodes are usually uploaded shortly after they are broadcast. The site is a joint venture between NBC Universal, Fox Entertainment, ABC and Providence Equity Partners, with former Amazon executive Jason Kilar acting as chief executive.

Right now, the site is entirely dependent on advertising and the NYT suggests the site makes little profit with a significant cut going to each owner.

However, it will shortly launch a premium subscription service for $US10 a month to diversify its revenue base. This product will allow users to watch shows on their smartphones, such as the iPhone, along with the iPad and even the PlayStation 3 console.

But analysts do point out some problems. The site doesn’t stream CBS shows, Viacom pulled a lot of its most popular shows earlier this year, including The Daily Show, and there is some talk that ComCast, which owns NBC, will be developing its own service to rival Hulu

Right now, Hulu simply doesn’t offer a complete replacement for broadcast television, which could turn some users off a $US10 subscription.

Analysts also point out Hulu is still relatively basic compared to a service like Netflix, the rental service which allows users to stream films over their computers, iPads, iPhones and game consoles, and suggest the site needs to mature its offering a little more.

International expansion could help the company’s prospects. Earlier this year, Hulu’s international business development manager Simon Gallagher told an audience at Sydney’s Media 2010 in February that Hulu has reduced piracy, and it could have the same affect here.

However, Gallagher also noted Australia’s lack of high-tech broadband infrastructure, advertising rates and the difficulty in allowing television producers to publish content on the site as deterrents.

But recent figures from Neilson show there is demand for an on-demand service. The 2010 Internet and Technology Report reveals 44% of regular online video users will increase the amount of streaming video they watch in the next year, while 36% said they would pay for video content.