Hulu insiders say a scrapped international expansion and changing culture have made them question what the streamer's future looks like under Disney
- Disney planned to roll Hulu out beyond the US as early as 2021, but the plans were scrapped in favor of Disney Plus and Star.
- Three former Hulu staffers told Business Insider that while they understood the decision, it was disappointing, and one of them described international expansion as a "North Star" that had guided the company.
- The move was one of several that has caused insiders to question what the future of Hulu looks like under Disney, the former employees said. But they said they were bullish about Hulu's position in the market.
- The former employees also said they felt the independent culture of Hulu had been diminished under Disney.
- Are you a former or current Hulu staffer with more to share? You can contact the author at [email protected] or DM him on Twitter @TravClark2.
- Visit Business Insider's homepage for more stories.
In February during a Disney earnings call, new CEO Bob Chapek said that Hulu would begin its international expansion as soon as 2021.
Disney had taken full operational control of the streaming service in 2019 after acquiring Fox's movie studio and other assets (including its stake in Hulu) and striking a deal with Comcast (which also had a stake in the streamer). Disney leadership presented Hulu as the adult complement to its family-friendly Disney Plus streaming service, which had launched in November 2019.
Together, these services would take on Netflix for world domination in streaming.
Launching in markets beyond the US was a huge deal inside Hulu, according to a former exec, who requested anonymity to protect business relationships.
Hulu had gone through many phases since launching in 2007, and this person said there was always a "North Star" staffers were aiming toward, whether it was getting to 10 million subscribers or launching a live TV product. International expansion was one such star.
But as 2020 wore on, Disney suddenly scrapped plans for Hulu's international roll-out, deciding instead to focus on Disney Plus and its India-based Star brand in non-US markets.
The reversal was one in a series of moves this year that caused some insiders to question what Hulu's future looks like under Disney. Business Insider spoke with three former Hulu employees, including two former executives, and industry analysts about the streamer's path forward. In an increasingly global streaming market, these people said that while Hulu had been an innovator in the space, a lack of an international footprint could hamper its ability to compete. The former Hulu employees said this long-term challenge, as well as an erosion of Hulu's unique identity that has occured under Disney, had led to a sense of uncertainty among some staffers.
Hulu referred Business Insider to Disney for comment. A Disney spokeswoman told Business Insider in a statement: "Hulu is a valued part of our unmatched portfolio of direct-to-consumer offerings, and our recent Investor Day presentation made clear our confidence in the service and our plans for continued investment in its future."
READ MORE: How Disney plans to expand its streaming services to key international markets with a playbook that's dramatically different from Netflix's
'I can't fault Disney for making that decision'
A major factor in Hulu's scrapped international roll-out was the way the Comcast deal was structured. Disney doesn't get to actually buy Comcast's 33% stake in Hulu until 2024, at which point the price will be determined by a third-party assessment of Hulu's market value. If Hulu becomes more valuable — through international success, for instance — Disney will have to pay more.
Early in 2020, this didn't seem like a big enough obstacle to sink Hulu's expansion plans. Internally, leadership was discussing which European market made sense to launch Hulu in first, the former exec said.
But then two things changed, the former employees said. First, Disney Plus began to experience runaway success following its launch, surging past its subscriber growth targets. And second, Disney leadership soured on the high costs of launching Hulu in markets where it didn't have brand awareness, especially as the pandemic hit the company's revenue hard.
As the second former Hulu exec put it: "Nobody in Europe knows what the f— Hulu is."
By an August earnings call, Chapek was publicly expressing this sentiment (albeit in less colorful language), saying Hulu had "no brand awareness outside the US," and that Disney had decided to launch an adult-focused streaming service internationally under its Star brand.
That will take different forms in different markets, Disney explained in its December 10 investor presentation. In Europe, Star will be a branded section inside the Disney Plus app. In Latin America, it will be a standalone service called Star Plus. But the constant is that in all markets outside of the US, Hulu isn't in the plan.
The former Hulu staffers and industry analysts who Business Insider spoke with said they understood Disney's decision. They get it.
"I can't fault Disney for making that decision," the first former Hulu exec said. "There was a lot of value in doing it the way they did it."
But it was still a blow that raised the question of where Hulu goes from here, and what its place is within Disney's broader streaming ambitions.
"Hulu's future is very much in the air and I don't think Disney knows exactly what to do with it," said Steve Nason, the research director at the research and consulting firm Parks Associates.
The Hulu portion of Disney's December investor presentation, led by president Kelly Campbell, highlighted this year's accomplishments including FX on Hulu and its original movies like "Palm Springs." Hulu's biggest series, "The Handmaid's Tale," was renewed for season five and there was a big announcement about a content deal with the Kardashians. 20th Century Studios and Searchlight Pictures, which Disney acquired in the Fox merger, will make exclusive content for Hulu.
But Star will stream many of these Hulu exclusives outside the US, including the new Kardashian content and FX originals.
And Disney's subscriber numbers update gave a stark reminder of the importance of international expansion. Disney said that Hulu had 39 million subscribers in the US. Disney Plus had 87 million worldwide, with about 30% coming from its Disney Plus Hotstar service in India.
Hulu is a strong streaming player, but the lack of international support is a concern
Despite the lack of an international path forward, the two former Hulu execs both said they were bullish on the brand's future.
Hulu has weathered many market changes in the 13 years since its debut and has continued to be a leader in streaming. In many ways, it has been a pioneer in the industry. It launched as a free aggregator of TV content and was known for streaming episodes the day after they aired on linear networks. It has several different plans that include ad-supported and ad-free versions, along with a live-TV component.
"I think Hulu will be a strong leg for Disney's direct-to-consumer products," the first former exec said. "Disney Plus will be the big driving force of it, but there's probably not a lot of 20-year-olds spending a lot of time with Disney Plus. But they are with Hulu, Netflix, and Amazon. It's a nice complement. It will create value in the long run."
Disney said in December that Hulu would be profitable in the fiscal year 2023, according to its projections. It projects Hulu to reach 50 million to 60 million subscribers by the end of 2024.
But Hulu is facing more competition than it has before, with major new streaming services like WarnerMedia's HBO Max and NBCUniversal's Peacock launching. And the lack of international scale is a nagging concern.
"The ability to get to 60 [million subscribers] may not exist if it doesn't have international support," said Joe McCormack, a media analyst at the research firm Third Bridge.
'A cog in a machine'
The international pivot likely contributed to a feeling of unease among Hulu employees that had been growing since Disney took control of the company, the former staffers said.
Hulu employees refer to themselves as "Hulugans" and both former executives said they "bled green."
But the first former exec said that in his last months with Hulu, his ability to make important decisions had been diminished.
"Even when providing counsel, it wasn't necessarily listened to," he said. "We were Disney's new toy."
The second former exec said that the "strong sense of identity" had disappeared from Hulu. "All of a sudden you wake up and you're just a cog in a machine," this person added.
But the third former staffer said that while the culture had become a bit less fun, the reason he left was uncertainty over his role — "whether I'd have a job and what it would look like."
It reflects a lack of understanding, even among some Hulugans, about what Disney's plans are for Hulu.
Hulu's long-term future is unclear
A merger of Disney's streaming services wouldn't surprise Parks Associates' Nason.
"I don't think it's a far-fetched idea to think Hulu and even ESPN Plus get integrated into Disney Plus," Nason said. The two former Hulu execs both said they thought this wasn't on the table.
But there was still the creeping concern among the former staffers that Hulu could, slowly, become a lesser-than offshoot of Disney Plus. Though they had left the company, these former staffers wanted to see Hulu continue to distinguish itself from Disney's flagship product because they believed strongly in the brand.
Hulu is where Disney can stream its adult-oriented content instead of putting it on family-friendly Disney Plus. It's already started to move in this direction with FX on Hulu and upcoming animated Marvel projects focused on adult audiences. But Disney has also shown a willingness to move this kind of content to Disney Plus by making Star (its Hulu replacement in Europe) a tab within the Disney Plus app instead of a standalone service.
And as rival media companies build their own streaming services, they could become increasingly reluctant to license top-notch content to Hulu, especially once Disney buys Comcast's stake in 2024, the first former exec said.
This former exec said his biggest fear was that Hulu could become a "repository for things Disney doesn't feel is worthy for Disney Plus."
But he said he still believes in Hulu. He still thinks that it has the best algorithm and interface of any streaming service. In many ways, he still "bleeds green."
"Maybe I drank the Kool-Aid too long," he said.
Are you a current or former Hulu staffer with more to share? Contact the author at [email protected] or DM him on Twitter @TravClark2.
Source: Read Full Article