Maybe Providence Equity Partners knew something when it sold its 10% stake in Hulu earlier this month for $200 million: Hulu, co-owned by Disney, NBCU and News Corp., has seen the number of hours spent viewing video on its site fall sharply in 2012, including a 58% drop to 65 million hours viewed in August from a peak of 156 hours in March, according to Wedbush Securities and comScore data. Nevertheless, it’s good ROI: Providence invested $100 million in LA-based Hulu when the venture began in 2007.
Nielsen reported that Hulu, excluding subscription-based Hulu Plus, saw unique monthly visitors decline to 12 million in August from 19 million last December.
The decline resulted in Hulu’s online video consumption market penetration falling to 1.5% from 3.9%. Google-owned YouTube continues to dominate online video consumption with 26% total market share in August — a percentage that dropped from 33% in July, according to comScore.
Meanwhile, comScore found that the number of total domestic online videos available grew from 45 billion to 47 billion between March and August, reports Home Media Magazine.
“We are at a loss to explain the decline [at Hulu], and we are dubious that it can be explained alone by a rapid shift to mobile consumption,” Wedbush analyst Michael Pachter wrote in an analysis.
Netflix’s market share grew from 2.8% in October 2011 to 3.3% in August. The amount of content consumed grew by 28% during the same period, reaching 140 million hours of video watched in August, according to Wedbush. The drop in Hulu’s viewers was driven by a 44% decline from a peak of 2.8 billion videos viewed in March to 1.6 billion in August.
Hulu this year has about 1,000 advertisers and 410 content partners, which was up 20% from the 343 content partners listed by the company in the beginning of 2011, according to Pachter and the Home Media Magazine story. Hulu also this year began selling ads based on viewers actually watching them in their entirety at CPMs (cost per thousand) about 10-times higher than YouTube.
As Hulu saw a 40% decline from 1.75 billion video ads served in March to 1.55 billion video ads served in August, according to comScore, its ad-supported streaming video business model has also spawned competition thereby eroding its video ad market share from 30% in February to 11% in August, said the Home Media Magazine story.
Since the article, comScore tells us more about the context comScore provided with respect to two issues impacting trends vs. prior periods: “The first was an enumeration change, which affected the entirety of our reporting universe. The second issue was specific to Hulu, which we noted in the August Video Metrix press release as follows:
We do our best to proactively communicate these issues to the marketplace but understand that sometimes these footnotes might get missed. That said, we do want to ensure that comScore data is being accurately interpreted when it is being publicly referenced.”
RBR-TVBR observation: Perhaps viewers are choosing to view network content directly on the network sites, rather than going to Hulu to see it. Reports also suggest Hulu is scaling back investment and exclusive license deals for their network programming, going instead to license content to proprietary and third-party websites. That’s different than what YouTube is doing (and apparently doing well), which is investing in third party content and making separate video channels out of it.