Time Warner invests in Hulu in win for cable cord-cutters

Carla Harmon
August 9, 2016

On Wednesday, Time Warner Cable announced that it had purchased a 10 percent stake in streaming service Hulu, joining other companies like Disney, Fox and Comcast in the joint venture.

The company posted second-quarter earnings per share of $1.29, compared to $1.25 per a share in the year-earlier period.

Hulu, which is jointly owned by the Walt Disney Co., 21st Century Fox and Comcast, now carries some of Time Warner's content.

Time Warner will now make Turner networks available to the upcoming Hulu streaming channel line-up including TNT, TBS, CNN, Cartoon Network, Adult Swim, truTV, Boomerang and Turner Classic Movies. Time Warner a year ago launched HBO Now, a stand-alone streaming service for the channel.

According to WSJ, Time Warner will pay $583 million for the 10% stake, valuing Hulu at $5.8 billion.

Hulu, founded in 2006, has built a name for itself by offering the ability to stream popular shows from broadcast and cable networks, typically the day after they are shown on TV. For Hulu, Time Warner's investment will help build up a viable third player in the growing market for online-only video services led by Netflix Inc. and Amazon.com Inc. - and bring much-needed cash to produce original programming.

The chart below gives an idea of each company's ownership, assuming that Time Warner's investment equally diluted each existing shareholder. In addition to traditional cable and satellite offerings, Hulu will go up against Dish's SlingTV and Playstation's Vue, which offer monthly online subscriptions to live TV channels. Revenues were up 2 per cent to $1.5 billion as subscription revenues rose 6 per cent. Speaking today alongside Time Warner CEO Jeff Bewkes during the company's second-quarter earnings call, HBO CEO Richard Plepler said his unit has had "constructive conversations" about including HBO in the live Hulu, as well.

The company said it expects adjusted profit for the year of US$5.35-US$5.45 per share, up from its previous forecast of US$5.30-US$5.40.

Shares closed down about 1.3% on Tuesday but added almost 3% in Wednesday's premarket action, trading at $78.00.

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