Hulu May Be Worth $2 Billion

Hulu, the most complete online video service on the web, is ready to go public at a valuation that could be more than $2 billion, according to the New York Times. This is not a surprise to people who follow the video industry, as rumors have been abundant that Hulu’s executive team has been in talks with banks for weeks, and their recent news that they may be introducing a subscription service and their potential acquisition of CBS shows would make them a fundamental gear in the machinery of broadcast-quality programming available on the web.

This I.P.O. would certainly be a situation where economic pundits are going to be kicking and screaming about overvaluation. Hulu is a fantastic company with over 200 million video plays a day and have been one of the only players to really crack the code on bringing high quality programming to an easy to use web format, but they’re still not making a whole lot of money. Everything on their site is currently free and their $100 million a year in revenue is entirely based on advertising and sponsor support.

The question is whether their new $9.99 a month subscription service is going to attract subscribers. With free web content, it’s always difficult to tell if people will still stay on board when they could find the same content elsewhere for free. In order for Hulu to be successful, they need to ensure that their premium service offers a lot more than just “no ads”. There aren’t too many details yet, but I hope to see some creative ideas from their camp, including a desktop application (similar to what Joost used to do) and advanced social features. They’ve announced so far that their premium service will allow for downloading entire seasons of a series and the ability to watch on your iPhone, iPad and Blu-Ray player.

The New York Times article also discusses the history and leadership of Hulu, pointing out its roots with large corporations:

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.

Led by Jason Kilar, a former executive, Hulu has grown to become one of the biggest sources of online video on the Web. It features content from most major TV networks – CBS and CW are two exceptions – and several movie studios like MGM andLions Gate.