Time Warner has agreed to acquire a 10% stake in the premium streaming TV service Hulu.
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The Hulu deal comes at a time when Time Warner is facing stiff competition from streaming services, particularly Netflix and Amazon Prime, as young viewers ditch traditional cable and shift to online services. Time Warner later confirmed it is investing $583 million, which implies Hulu is worth almost $6 billion. Time Warner a year ago launched HBO Now, a stand-alone streaming service for the channel.
The new streaming service is said to be one that broadcasts live TV over the internet, an option for those who still want to watch live TV but don’t want to pay for a cable subscription. The new Hulu streaming OTT service is expected to debut early next year, competing with similar offers from Sling TV and Sony PlayStation Vue.
Disney, NBCUniversal and Fox each own 30% of Hulu, giving Time Warner the smallest stake. Time Warner is unable to get a seat on Hulu’s board of directors with a 10% stake.
Time Warner also owns the prominent Turner Broadcasting cable channels CNN, TBS, TNT and Cartoon Network.
“This investment from Time Warner marks a major step for Hulu as we continue to redefine television for both consumers and advertisers”, said Mike Hopkins, Hulu’s chief executive, in a statement.
Time Warner reported lower Q2 net income as programming costs rose and movie revenue declined. And total revenue for the quarter fell by 5%, to $7 billion.
According to the WSJ, a sticking point in the companies’ negotiations was that Time Warner “wasn’t comfortable with the vast amount of current season content made available on Hulu, believing that the availability of such content for a cheap price encouraged more people to cut the cord”.
The company posted second-quarter earnings per share of $1.29, compared to $1.25 per a share in the year-earlier period.
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Adding Time Warner’s networks to its live streaming service will have decent synergies for Hulu as well. Its diluted earnings per share was $1.2 up from $1.16, beating analysts’ average estimate of $1.16 per share and reflecting $1.6 billion of 23 million shares repurchase year-to-date through July 29, 2016.
