Tuesday, May 30, 2017

Last summer we had a post examining the finances of Hulu—which is not a public company itself, but does have several publicly traded investors that disclose some details about Hulu.

For example, Comcast reported last July 27 that it had a 33 percent stake in Hulu, and recognized $65 million in losses from Hulu for the first half of 2016, compared to $24 million in the first half of 2015. Do the math, and that implies total annual losses at Hulu of $144 million in 2015 and (gulp) $390 million in 2016.

Comcast was one of the original three investors in Hulu, along with Disney and 21st Century Fox, at 33 percent each. Time Warner joined the crew last August, acquiring a 10 percent stake in Hulu and diluting everyone else’s holdings down to 30 percent each.

So, we wondered, what have they all been disclosing about Hulu lately? How might Calcbench users snoop around the footnote disclosures of public companies to glean more intel about this popular private one?

We started with our Interactive Disclosure page, generally the best place to find juicy details about filers and their holdings. All we had to do was create a peer group of the four companies that own Hulu; and then enter “Hulu” in the text search box on the far right side of the page.

The most insightful details came, as usual, from Comcast. In its first-quarter 2017 report, Comcast reported “our share of loss at Hulu” as $54 million. If Comcast owns 30 percent of Hulu, and that share brought it a $54 million loss, that means Hulu lost $180 million in the first three months of 2017.

For comparison, Comcast also notes that it recorded a $25 million loss in the year-earlier period—when the company owned 33 percent of Hulu, since Time Warner had yet to arrive. So that was a total loss of $75 million for Hulu in that quarter, which has since ballooned to $180 million this year.

OK, so all those operating losses… against how much revenue, exactly? Unclear. Comcast, Fox, and others only report the size of the loss itself, not anything about total revenue. Disney did say in its first-quarter report that operating losses “were due to higher content, marketing and labor costs, partially offset by higher advertising and subscription revenue.” We don’t know more than that, although we can assume that the star power and high production quality of The Handmaid’s Tale must have cost a fortune.

We do know that Hulu was valued at roughly $5.9 billion last summer, since Time-Warner purchased its 10 percent stake for $590 million. We also know that Hulu has a $338 million term loan due this coming October, for which Comcast, Fox, and Disney have guaranteed $113 million each. Still, none of that helps us understand how much revenue Hulu brings in annually, and how large those operating losses are relative to it.

The hints somewhat suggest that Hulu today is on the same growth path as Amazon.com in the late 1990s: revenue growing like weeds, but operating losses growing right along with it. And that’s just a guess; plenty of other companies grew like weeds in the 1990s, never made a dime of profit, and went belly up.

One final clue comes from Disney’s proxy statement, in the section listing executive compensation. There, the company says that Kevin Mayer, Disney’s chief strategy officer, received a performance bonus of $4.5 million last year. For what? “Managing the company’s strategic merger and acquisition and joint venture activity, particularly … to engage in developing models for distributing media” including investments in BAMTech, Vice Media—and Hulu.

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