Hulu CEO Plots a Way to Stand Out From the Crowd in Online TV

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When NBC and Fox got together 10 years ago to create Hulu, they offered customers something they’d never had before: last night’s TV shows available over the internet for free. It presaged the future of TV — online and on-demand, no VCR or DVR required.

By the time Mike Hopkins took over as chief executive officer of Hulu in 2013, that early advantage had been mostly squandered. Netflix Inc. was laying the groundwork for a global TV network, and Amazon.com Inc. was about to release a slate of video programs. Hulu’s owners — Comcast Corp., 21st Century Fox Inc. and Walt Disney Co. — had explored selling the company twice. Fights between Hulu’s leadership and ownership spilled into the press.

Mike Hopkins Fotografia de: Photographer: Bennett Raglin/Getty Images for Hulu

Mike Hopkins

Photographer: Bennett Raglin/Getty Images for Hulu

After restoring calm internally, Hopkins is now putting Hulu on course for its most ambitious transformation yet — even for a streaming service that has changed its identity more than once on its way to accumulating 12 million subscribers. While Netflix and Amazon turn their attention to international expansion, Hulu is focusing on the U.S. with a plan to become the first streaming service to couple live TV with a wide library of on-demand programs that goes beyond what traditional cable offers.

“Once we do this, more people will be talking about Hulu than there are today,” Hopkins said in an interview. “A lot of people are talking about Hulu, but this puts us in a different category.”

Read more: A QuickTake on how streaming video is changing the industry

Hopkins, 48, is betting that he can marry the best of what viewers love about streaming, on-demand video with the advantages of a cable-TV subscription. While most programs — dramas, comedies, reality shows, movies — can be viewed or even binge-watched at any time, some things are still better live — particularly sports, breaking news coverage and live events like the Oscars. Even Netflix has said such a model, if done well, would be its biggest competitive threat.

Hulu plans to sell a package of live TV channels within its streaming app early next year, and has spent much of the past few months trying to close deals with all its partners. The service has announced agreements with Disney, Fox and Time Warner — three of its four owners — and is negotiating with CBS and NBCUniversal, owners of the two most-watched networks in the U.S.

If everything goes according to plan, the package will include major sports and news networks, as well as broadcast and general entertainment cable networks. Local broadcast affiliates are also likely to be part of the offering, which would deliver the most-watched networks in key markets. And Hulu’s user interface would let viewers hop easily between last week’s episode of “Empire” and a football game already in progress, a process that can require several steps with traditional cable TV.

Top U.S. Streaming-Video Services by Subscribers
Netflix
Amazon Video (Amazon Prime)
Hulu
MLB.TV
WWE Network
Sling TV
HBO Now
Crunchyroll
Showtime
CBS All Access
Source: Parks Associates

Hulu has often struggled to set itself apart, and its business model has morphed a few times over the course of its decadelong history, from free to paid and from ad-supported to ad-free, at least for some subscribers. While Netflix or Amazon benefit by showing previous seasons of shows that have already appeared on TV networks, Hulu also offers some shows as early as a day after they’ve aired. By adding live TV channels to the mix, Hulu could provide an alternative for people who don’t want traditional cable.

Hopkins, a soft-spoken media veteran, joined Hulu in 2013 after 16 years at Fox, where he was in charge of making deals with pay-TV providers Comcast and Time Warner Cable. Hulu isn’t trying to steal their customers, he said. It could even partner with them. Hulu is in talks to sell its app via Comcast’s Xfinity service, as Netflix does, for example.

Yet the trends are indisputable. The U.S. pay-TV industry lost 340,000 subscribers in the third quarter, a 35 percent greater decline than a year earlier, according to Bloomberg Intelligence. ESPN, the most widely watched network in most years, has 90 million subscribers through cable and satellite, the lowest since 2005, according to Nielsen data.

“There’s definitely this growing pool of people either never paying for TV or cutting the cord,” Hopkins said.

Hulu isn’t the only company to recognize that trend. A host of live-TV streaming services are cropping up online, and the marketplace is growing crowded. Dish Network Corp.’s Sling TV and Sony Corp.’s PlayStation Vue already offer cable-like packages over the internet, and AT&T is introducing DirecTV Now at an event Monday in New York. Amazon and Google’s YouTube have also been working on similar plans. (Thus far none has been a major hit; the biggest, Sling, has about a million subscribers, according to Parks Associates.)

‘Easy Process’

Hulu won’t differentiate itself with specific channels, since all of the services will eventually offer similar packages of programming for comparable prices, Hopkins said. Instead, Hulu can set itself apart by creating “an easy process to getting to the shows and sports and news you want to see,” Hopkins said.

Hulu hasn’t announced any details about pricing or the composition of its bundle. AT&T has said its service will have more than 100 channels and cost $35 a month. Sling offers more than 25 channels for $20 a month.

Part of the challenge for Hopkins will be offering a compelling price while still squeezing out a profit for Hulu, where losses have grown. The company will lose $400 million to $500 million this year, according to Evercore, and losses next year will surpass $500 million. Hulu has spent that money amassing an entertainment library that spans original dramas “11/22/63” and “The Path,” re-runs of “Seinfeld” and last night’s TV.

“I’m not 100 percent sure what their end game is,” said Jim O’Neill, an analyst with Ooyala. “They are a little bit vague with their strategy.”

Direct Threat

The strategy for the owners is clear. Cord-cutting is a direct threat to sales and profits of the cable networks owned by Disney, Fox, Comcast and Time Warner. Hulu offers them a hedge against the new world of online TV — and a model for future deals with pay-TV partners.

“We’re not targeting pay-TV customers to switch,” Hopkins said. But for the people who are going to shut off cable anyway? “We’ll be there.”

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