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Last updated on April 24, 2014 at 21:24 EDT

Hulu Likely To Raise Funds In IPO Push

October 9, 2010

US Web video service Hulu is set to raise up to $300 million in an initial public offering likely to be led by Morgan Stanley, and could file a prospectus with the U.S. Securities and Exchange Commission before the end of the year, according to sources familiar with the scenario.

Hulu, which runs a variety of shows such as “Glee” and “Modern Family” over the Internet, has several options under consideration, one being tapping public markets, to help it battle fast-moving rival Netflix, and better financed technology companies Google and Amazon.

Other options would include getting more media companies to contribute new programming or raising more money from its existing partners, according to one source.

Hulu could reach a decision by November, the source told Reuters, adding that the offering is reliant on the renewal of rights to carry shows, some of which expire within a year.

The online video service, backed by NBC Universal, Walt Disney Co, News Corp and private equity firm Providence Equity Partners, was launched in 2007 in an attempt to harness the fast growing surge of online video viewing.

The online video market is expected to reach $16.1 billion worldwide through paid and ad-supported services by 2012, according to media tracking firm ABI Research.

Hulu is the number two online video service in the United States, behind Google-owned YouTube. But with Google’s new Google TV service securing deals with Time Warner, and Amazon.com considering a subscription video service of its own, Hulu has found it needs to race to pay for more content out there to stay competitive.

Hulu has operated a free service, but began testing a subscription-based video service as well that offers more shows for mobile platforms, game consoles and TV sets in June.

Filing by the end of the year means Hulu will have the flexibility to push an initial public offering out in January or February if the new issue market improves. It could also push for an IPO in April or May after first quarter results have given it more time to gauge its financial stability and the market, another source told Reuters.

Among the banks in August pitching to lead the offering, were Morgan Stanley, Goldman Sachs and Bank of America. Unofficially, at least, Morgan Stanley has been given the nod for the lead slot.

It has not yet been decided how many IPO shares will be new and how many will be sold by current stakeholders. The offering is too small to provide much liquidity to shareholders, one source said.

Earnings from the offering are expected to be used to bring new shows to the subscription service, another source added.

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