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Hulu Makes Money, So Why Is There a Good Chance It Could Disappear?

Next month, Hulu loses its NBC programming; in 16 months, it could lose much more.

SATURDAY NIGHT LIVE -- “Natasha Lyonne, Japanese Breakfast” Episode 1826 -- Pictured: (l-r) Kyle Mooney, Fred Armisen, host Natasha Lyonne, Ego Nwodim, Cecily Strong, and Heidi Gardner during the “Mr. Dooley” sketch on Saturday, May 21, 2022 -- (Photo by: Will Heath/NBC)

Kyle Mooney, Fred Armisen, Natasha Lyonne, Ego Nwodim, Cecily Strong, and Heidi Gardner on “SNL”

Will Heath/NBC

NBC is getting out of the Hulu business. In September, NBC series will begin streaming new episodes next-day on NBCUniversal’s streaming service Peacock — the same arrangement it had for years with Hulu.

Losing NBC’s next-day programming is a significant blow to Hulu, which is co-owned by NBCUniversal parent Comcast (1/3) and Disney (2/3 and the controlling stake). Neither of Hulu’s parents are showing it much favor: While it once seemed like a natural home for the child-unfriendly content that Disney+ couldn’t abide, in March Disney pulled its R-rated Marvel series off Netflix but bypassed Hulu in favor of its core streaming service Disney+. In June, Disney+ nabbed R-rated superhero movies “Deadpool” and “Logan.”

Hulu’s subscriber growth was already slowing in the face of a saturated marketplace; then, the economy tanked. Now with NBC out of the picture, only ABC and Fox programming will be available next-day on Hulu. (CW once had a similar agreement as well, but pulled out years ago.)

“I think this could be the thing that nudges Hulu into decline,” nScreenMedia founder and chief analyst Colin Dixon told IndieWire.

Peacock needs the jumpstart. After adding 4 million paid subscribers in the first quarter of 2022, when the streaming service had both the Super Bowl and Winter Olympics, Peacock’s subs tally stayed flat in Q2. The streamer lost 1 million monthly active accounts from its free tier.

Like other broadcast networks, NBC is technically available for free over-the-airwaves via use of an antenna; of course, almost no one does that. “For the scripted and unscripted drama stuff, linear television is not the way people want to watch it,” Dixon said. “They want to watch it on-demand. They want to watch it when they’re ready. And that’s where Peacock I think is going to win.”

Hulu is a rarity among SVOD (subscriber video on-demand) services: It’s actually profitable. However, that doesn’t mean it is in demand. Dad Disney is focused on Disney+ and Mom NBCU is clearly all-in on Peacock, a pair of wholly owned loss leaders perceived as the future of their respective companies. (Certain NBCUniversal programming will remain in Hulu’s library this fall and beyond.)

In January 2024, Hulu’s parents will almost certainly divorce. Back in 2019, Comcast and Disney struck a deal: Disney took immediate operational control of Hulu and agreed that as early as 2024, Comcast could require Disney to buy its 33 percent stake at fair market value. Disney guaranteed a minimum total equity value of $27.5 billion.

Where will that leave their depressed kid? At that price tag, it’s quite possible that no one will claim custody of Hulu. “It’s a real dilemma,” Dixon said. “It’s entirely possible that no one will want it.”

While the deal made in 2019 “requires” Disney to buy out the Comcast stake, that’s less likely in practice: Disney and Comcast are partners on other entities beyond Hulu, which makes the cutthroat approach less appealing. The deal terms provide Comcast with some leverage, but the most likely scenario is renegotiation well in advance of that January 2024 deadline.

As such, Hulu, a money-making streaming service with 45.6 million subscribers (as of April 2; we’ll get an update for the June quarter on Wednesday afternoon) and major ARPU (average revenue per user), could be lost to history. Sounds crazy, because it kind of is.

Hulu needs a superhero, R-rated or not, to save it — and sooner rather than later.

“It does have a large subscriber base,” Dixon said. “If somebody would take it on now — or soon — that they could likely provide the funding needed to help it maintain its position in the market.”

Sony, Microsoft — you reading this?

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