Disney makes loss-making Hulu investment pledge

Hulu screengrabHulu made an equity loss in the quarter ending October 3 due to higher content and marketing costs, but the company’s owners plan to continue to up investment in the business.

Announcing its fiscal fourth quarter and full year results, Disney – one of Hulu’s three co-owners – said that it was optimistic about Hulu’s strategic direction and the video-on-demand market in general, despite the service being in the red.

“Hulu has and is going to continue to step up their investment in both acquiring and producing original programming and programming from others, and that will continue to increase their losses in the near term,” said Disney’s chief operating officer, Thomas Staggs.

“We believe it’s going to create value over time and we think there’s value in them strengthening their offering. Furthermore, the market is big enough for them and others to thrive.”

The comments came as Disney said that operating income at its broadcasting division were flat for the quarter at US$164 million, with growth in advertising and affiliate revenue offset by higher programming costs, lower operating income from program sales, an equity loss from Hulu and higher marketing costs for the autumn season launch.

Disney said that lower operating income from program sales was driven by an increase in cost amortisation and lower sales. Decreases for My Wife and Kids and America’s Funniest Home 4 Videos were partially offset by the sale of How to Get Away with Murder in the current quarter.

Overall, for the full year, Disney reported a 7% increase in revenues to a record US$52.5 billion and a 12% increase in net income to a record US$8.4 billion.

The Walt Disney Company, 21st Century Fox and NBCUniversal jointly own Hulu. The US premium streaming service offers films and TV series with limited commercials for US$7.99 per month or commercial free for US$11.99 per month.

Speaking at MIPCOM in October, Hulu CEO Mike Hopkins said the company aims to make a “big step forward” in its film offering and is “evaluating” international markets for potential launches. He said that Hulu planned to increase the amount of film content on its service, following its August deal to secure exclusive movies from premium pay network Epix. Hulu closed its agreement with Epix after the latter’s agreement with Netflix ended without a new deal.