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Economics of Online Video:Hulu P&L

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Analysis By:

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Silicon Alley Insider

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HULU KEY ASSUMPTIONS: Mid-level scale, 10% distribution fees, 70% royalties, 100% videos monetizable, high CPMs.

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VIDEO UNIT P&L (CPM)NOWFUTURE?*

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Ad Sales Price (CPM)$10.00$20.00$30.00$40.00$50.00$10.00$20.00$30.00$40.00$50.00

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% of Videos Monetizable100%100%100%100%100%100%100%100%100%100%

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Revenue (Effective CPM)$10.00$20.00$30.00$40.00$50.00$10.00$20.00$30.00$40.00$50.00

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Distributed Videos %50%50%

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Distribution Fees (on Dist Videos)10%$0.50$1.00$1.50$2.00$2.5010%$0.50$1.00$1.50$2.00$2.50

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Royalties (% of Rev After Dist Fee)70%$6.65$13.30$19.95$26.60$33.2570%$6.65$13.30$19.95$26.60$33.25

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Bandwidth (CPM)$1.50$1.50$1.50$1.50$1.50*Down 50%$0.75$0.75$0.75$0.75$0.75

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Storage (CPM)$0.20$0.20$0.20$0.20$0.20*Down 50%$0.10$0.10$0.10$0.10$0.10

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Transcoding (CPM)$0.01$0.01$0.01$0.01$0.01*Down 50%$0.00$0.00$0.00$0.00$0.00

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Other (% of Revenue)3%$0.30$0.60$0.90$1.20$1.503%$0.30$0.60$0.90$1.20$1.50

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Gross Profit$0.85$3.40$5.95$8.50$11.05$1.70$4.25$6.80$9.35$11.90

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Margin (% of Revenue)8%17%20%21%22%17%21%23%23%24%

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SG&A (% of Revenue)50%50%50%50%50%50%50%50%50%50%

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SG&A (CPM)$5.00$10.00$15.00$20.00$25.00$5.00$10.00$15.00$20.00$25.00

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Operating Profit-$4.16-$6.61-$9.06-$11.51-$13.96-$3.30-$5.75-$8.20-$10.65-$13.10

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Margin-42%-33%-30%-29%-28%-33%-29%-27%-27%-26%

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COST ASSUMPTIONS

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Bandwidth

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Bandwidth Cost Per GB$0.05$0.08$0.10$0.13$0.15

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Average Video Size (MB)2020202020

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Cost Per Video Stream$0.001$0.0015$0.002$0.0025$0.003

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Cost Per 1000 Video Streams$1.00$1.50$2.00$2.50$3.00

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Transcoding

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Transcoder$2,500$3,000$3,500$4,000$4,500

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Videos/Day1,0001,0001,0001,0001,000

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Videos/Year365,000365,000365,000365,000365,000

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Life (Years)22222

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Cost Per Video$0.00$0.00$0.00$0.01$0.01

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Cost Per 1000 Videos$3.42$4.11$4.79$5.48$6.16

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Average Streams Per Video1,0001,0001,0001,0001,000

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Cost Per 1000 Streams$0.003424657534247$0.004109589041096$0.004794520547945$0.005479452054795$0.006164383561644

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Storage

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Storage Server (7 terabytes)$5,000$6,000$7,000$8,000$9,000

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Capacity (Videos)40,00040,00040,00040,00040,000

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Cost Per Video$0.125$0.15$0.175$0.2$0.225

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Cost Per 1000 Videos$125$150$175$200$225

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Average Streams Per Video1,0001,0001,0001,0001,000

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Cost Per 1000 Streams$0.13$0.15$0.18$0.20$0.23

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*Future assumes bandwidth, storage, transcoding costs drop 50%.

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Published By:

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Silicon Alley Insider

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Sources: SAI estimates.