Hulu: Analysts Weigh in on Future of Company, CEO Jason Kilar

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After the online video joint venture ends a four-months sales process, Wall Street observers chime in on what might be next, including whether Hulu could revisit an IPO.

NEW YORK - What is next for Hulu now that the online video joint venture has ended a four-months sales process?

Some Wall Street analysts on Friday said the company could reconsider an initial public offering in the next couple of years, but also cited hurdles for such a move.

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And asked about the future of CEO Jason Kilar, whose previous contract ended earlier this summer and who had some conflicts with Hulu's owners in the past, some said he should be asked to stay.

Kilar is still with the company, sources said. Hulu's owners and a spokesman didn't comment on future steps beyond the end of the auction.

"Why wouldn’t Jason be renewed?," said BTIG analyst Richard Greenfield though. "He’s done an amazing job!"

"I’d assume he’d be staying," added Miller Tabak analyst David Joyce.

Kilar is "very impressive," said Larry Haverty, portfolio manager at Gamco Investors, which is an investor in News Corp. "But he could move on to bigger things."

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The Wall Street Journal reported Friday that the end of the Hulu auction could lead to talks with Kilar and other top executives with small stakes in the company about buying them out.

Hulu is owned by entertainment conglomerates News Corp., Walt Disney and Comcast's NBCUniversal, as well as private equity firm Providence Equity Partners.

Kilar had a famous public run-in with Hulu's owners when he questioned traditional television's approach to business that rubbed some of his corporate bosses the wrong way. But some on the Street pointed out that his relationship with Hulu's owners seems to have been calmer since then.

Still, Hulu's multiple owners will likely continue to mean disagreements on strategy, observers say. "It is a difficult ownership structure where there are varied corporate interests with different opinions on ad loads and content windowing availability," said Joyce. "But we think Hulu, which was the 9th most-visited online video site in August [according to comScore] with 26.4 million unique visitors and 166.5 million viewing sessions, but the second-highest in terms of engagement [minutes per viewer at 192.4 for the month], should survive as monetization is increasing, but it might need a more consensus approach toward content availability and advertising."

According to the Wall Street Journal, Providence has an upcoming option to sell its small stake in Hulu, which could lead to the company's exit from the company. It wasn't clear though if the other owners would look to jointly buy out its stake or look for other options, such as bringing in another investor or offering Providence's stake in an IPO.

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Hulu previously explored a possible IPO, which some said could be valued at $2 billion.

Analysts said Hulu's owners could look at that option again down the line, even though not all are convinced it would be a good idea. "They would not [do it] any time soon if at all," suggested Joyce. "Right now, the IPO market would be challenged."

And Susquehanna Financial analyst Vasily Karasyov pointed out: "To do an IPO you need earnings growth."

Meanwhile, Wells Fargo analyst Marci Ryvicker said in a report Friday that the end of the Hulu auction is a positive for shares of satellite TV firm Dish Network, which was one of the lead bidders.

"We don't think the investment community quite understood (or liked) Dish's potential acquisition of Hulu, especially given that the company already has access to such content via its linear Dish Network," she wrote. "Now that such sale has been pulled, we think an overhang on Dish stock has been alleviated."


Twitter: @georgszalai

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