Netflix Inc. is having a great time as a top streaming service with its global expansion plans. However, its lead in the market is not guaranteed because Hulu is fast on its heels in catch-up game. Netflix was in the news yesterday after it announced that it was breaking new grounds in Hong Kong, Taiwan, and Singapore as it expands into Asia. The Wall Street Journal reports that Hulu has designs on supplanting Netflix as Hulu starts to pursue content acquisition aggressively.
Netflix is the largest video streaming service, but Hulu is fast on its heels. Neilsen reports that Netflix controls 38% of the U.S. market. Hulu controls 18% and Amazon Instant Video controls 13% of the market.
Three reasons Hulu is an edge over Netflix
The first event signaling that Hulu is serious about supplanting Netflix was when it outbid Netflix to acquire the rights to Seinfeld. It was reported that Hulu paid $160M for the rights to the TV Series. Hulu has reached contracts with FX and AMC as it continues to move to original series. Interestingly, when Netflix said that it would not renew its Epix contract, Hulu jumped in to snag up the Epix deal in a matter of hours. Now, Hulu is home to the hunger games series, James Bond films – Netflix doesn’t really have much of a lead over Hulu in terms on content.
Hulu however is a brainchild of several mega-media firms – NBC Universal, Fox, and The Walt Disney Company created Hulu as a joint venture. In essence, Hulu will find it easier to make content deals with media houses than Netflix, which is more of an outsider in the content space.
Secondly, Hulu is a private firm while Netflix is a publicly traded firm. In essence, Hulu answers to a relatively small number of investors and thus, it can make decisions without having to appease a large base of shareholders. In contrast, Netflix has a board made up of people with different interests; hence, it must usually make decisions in favor of the popular opinion.
Thirdly, Hulu is smaller and growing fast, yet, Netflix is seeing mature growth in the U.S. and it is now seeking global expansion. Netflix has 65 million global users – about 42 million of those users are in the U.S. Hulu has 9M users on its Hulu Plus service. The key point here is that Hulu saw a 50% increase in its user base in the past year.
Netflix has been here before
When Netflix started, it relied on content deals with media houses to provide viewers with content deals. However, the cost of buying content leaves a big dent on Netflix’s financials in the big picture and the firm is now working on creating original content. Hulu leverages the relationship it has with media houses now, but content costs will finally become unbearable as it grows.