Hulu Exceeds Expectations, Turns to Profit in Quarter

(Image credit: Hulu)

The Walt Disney Co. said its Hulu streaming service exceeded the company’s financial expectations and turned profitable in the quarter.

Overall Disney’s direct to consumer losses fell to $293 million in Disney’s fiscal third quarter from $624 million a year ago.

Speaking on Disney’s earnings call Thursday, CFO Christina McCarthy said that Hulu had subscriber growth and very strong ad revenue.

Hulu had a total of 42.8 million subscribers, up from 41.6 million in the second quarter. Its Hulu Plus Live TV vMVPD lost 100,000 subscribers and finished the quarter with 3.7 million customers.

McCarthy said the advertising gains were driven by both a gain in the number of impressions, as well as higher rates. 

As ratings fall at linear networks, advertisers are shifting their dollars into streaming, and Hulu has been one of the main beneficiaries.

“I think the advertising sales team, if they had more inventory, they could certainly sell it. There’s so much demand for it,” she said, pointing to an upfront market in which 40% of the dollar volume for Disney Ad Sales went for digital and streaming.

She added that Hulu was seeing growth in addressable advertising as the dynamic ad insertion technology for Hulu Live ramps up.

“We’re very pleased with what’s going on at Hulu,” she said.

Analyst Steven Cahall of Wells Fargo estimated that Hulu's earnings totaled about $300 million, putting it ahead of the profitability guidance previously provided by Disney.

While Disney controls Hulu, it is in the process of buying out Comcast’s 33% stake in the streamer and its improving finances could make that stake more expensive.

The companies are currently in arbitration over Hulu’s value. 

In June it was reported that Comcast has stopped making financial contribution to fund the daily operations of Hulu.

Jon Lafayette

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.