As Hulu Revenue Doubles, It Sparks a Set Top Box Boom

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Hulu’s CEO Jason Kilar reiterated that the video service is on pace to double its revenue in 2011 and is expected to hit 1 million paid subscribers this year. The numbers, shared in a blog post, mirrors similar projections from Hulu earlier this year but now has the data from the first quarter to back it up.

The numbers by themselves are impressive and show that the momentum behind online video services shows no signs of letting up. According to Kilar:

  • Hulu is pace to hit half a billion dollars in revenue in 2011 after recording $263 million in revenue for 2010. Hulu previously hit $108 million revenue in 2009.
  • First quarter revenue for Hulu grew approximately 90 percent over the same period in 2010.
  • Hulu is on pace to hit 1 million paid subscribers of Hulu Plus, which launched in November.
  • Hulu’s advertiser base grew 50 percent from 194 in the first quarter of 2010 to 289 in the first quarter of this year.
  • Hulu’s content partners, which is now up to 264, is expected to earn $300 million through Hulu in 2011.

But the latest figures also point to the larger effect that Netflix, Hulu and others are having on consumer behavior and also hardware sales. As my colleague Ryan Lawler reported yesterday, an estimated 2 million households are expected to have cut the cord and drop paid TV services in favor of broadband video services between 2008 and 2011, according to Convergence Consulting Group. Though the pace of cord-cutting is expected to slow this year, it is still happening at a faster rate than in 2008 and 2009.

But the growth of Hulu is also having an effect on hardware set-top box sales. Infonetics Research said that the growth of Hulu and Netflix helped the sale of standalone set-top boxes such as Roku, Boxee and Apple TV almost double from the third quarter of 2010 to the fourth quarter of 2010. The video services are also helping fuel sales of hybrid set-top boxes that mix cable and satellite content with online video.

“In the fourth quarter of 2010, we witnessed the dramatic growth of over-the-top services, as service providers and equipment vendors hit the ‘sweet spot’ for pricing,” wrote Teresa Mastrangelo directing analyst for video at Infonetics Research.

There are still a lot of challenges ahead for online video services, which must work hard with content partners to procure attractive libraries. And the money at stake is still small compared to what traditional paid TV providers make. But the continued breakout growth of services like Hulu show that the interest in online video is still hot, which has implications beyond just Hulu’s bottom line.

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