The third-quarter earnings season now in the rear-view mirror, but an interesting tidbit from The Walt Disney Company’s quarterly report surfaced over the long weekend: The conglomerate expects its losses from its investment in Hulu to increase by $100 million over the course of the next fiscal year.
According to Disney CFO Christine McCarthy, the increased red ink is “driven by Hulu's investment in its digital MVPD service and higher content spending."
Speaking during Disney’s fiscal fourth-quarter earnings call on Nov. 9, she added, “Given the timing of these investments, we expect about $70 million of that increase in equity losses in the first quarter.”
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The comments were picked up by Home Media Magazine, which also noted that 21st Century Fox also reported a $62 million loss tied to its investment in Hulu. Disney, Fox and Comcast/NBCUniversal each own 30% of Hulu, with Time Warner Inc. controlling 10%.
Hulu is spending $2.5 billion on original program production and program acquisition to compete with Netflix and Amazon in the subscription video on demand market. It’s also spending aggressively to launch a virtual MVPD service, Hulu Live.
For his part, Disney CEO Bob Iger described the increased losses as a worthwhile investment. Hulu Live packages a collection of live-streamed broadcast and cable channels, competing not only with YouTube TV, but traditional pay TV incumbents Dish Network and AT&T. Hulu hasn’t disclosed how many customers it has for its virtual pay TV service.
“We’ve seen some nice numbers there,” Iger said specifically pointing to Hulu Live during Disney’s Nov. 9 call. “It will be a significantly valuable business for us.”
“I think the Hulu Live product is setting a benchmark in terms of user experience, and I think it's typically really—it's a really interesting time for innovation in the marketplace, added Fox CEO James Murdoch a day earlier