The buzzy debut of the second season of "Stranger Things" on Netflix Inc. (NFLX) - Get Report Friday, Oct. 27, is yet another reminder that Hulu LLC has yet to pose much of a challenge to its still very dominant rival in the increasingly expansive business known as subscription video on demand.

Hulu's problem, Bernstein Research's Todd Juenger argued on Friday, is a simple one: It continues to focus on licensing back episodes of TV shows from its four large and demanding owners rather than acquiring original content like its chief adversary.

Yes, Hulu has won critical praise -- and presumably subscriptions -- for "The Handmaid's Tale," but the Emmy Award-winning series is an exception rather than the rule, Juenger argues. The content Hulu most often trumpets comes from the libraries of its four stakeholders: Walt Disney Co. (DIS) - Get Report , Twenty-First Century Fox Inc. (FOXA) - Get Report , Comcast Corp.'s (CMCSA) - Get Report NBCUniversal and Time Warner Inc. (TWX) , which holds a 10% stake in the joint venture. 

In recent weeks, Hulu has issued a stream of announcements about licensing content from NBCUniversal ("Parenthood" and "30 Rock") and Disney-ABC ("Boy Meets World," "Home Improvement" and "Dinosaurs") and an exclusive deal with Warner Bros. Animation/Cartoon Network ("Teen Titans Go!," "The Amazing World of Gumball" and similar fare).

That's all well and good, but that licensed content is unlikely to significantly move the subscription needle, the Bernstein analyst says. As HBO CEO Richard Pepler often argues, movies constitute about 80% of the platform's viewing but people subscribe to the service because of "Games of Thrones." Same is true at Netflix, and it stands to reason at Hulu as well.

Netflix, meanwhile, has been going full throttle on original content for years. After spending more than $6 billion this year on content -- about 25% original -- CEO Reed Hastings said earlier this month that the company plans to increase its budget for content to more than $8 billion in 2018, with the portion of originals nearing 50% by 2020. And the fruits of that spending are as clear as the fact that Netflix shares have surged 60% this year. There's "Master of None" and "Jessica Jones," and of course, "Orange Is the New Black" and "House of Cards."

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Hulu as well as HBO, are both expected to spend around $2.5 billion this year on content, with all of Hulu's total in the U.S. And while Time Warner on Thursday reported a 12% increase in subscriber revenue at HBO in the third quarter compared with the same period a year earlier, Juenger's prognosis for Hulu is less sanguine: The Bernstein analyst calculated that Hulu will have lost $1 billion in 2017, though the company hasn't said much at all about profitability.

In response to the Bernstein report, Hulu, in an e-mailed statement, said "The vast majority of the assumptions and numbers reflected in this report are categorically incorrect."

To be sure, Netflix has high leverage and negative cash flow, but subscriptions have yet to plateau and may not for some years. Netflix's worldwide subscription total reached an eye-popping 109 million at the end of September. Meanwhile, Hulu has kept its subscriber number under wraps. Juenger uses a figure of 12 million subs, which presumes no gain since May 2016, the last time that Hulu made a number public.

Hulu has been similarly mum about subscriber interest in its Live TV service, which launched in May with 50 channels at $40 per month. Hulu's service, which most prominently features its library of network shows, has run into stiff competition from other pay-TV streaming services including DirecTV Now from AT&T Inc. (T) - Get Report , Sling TV from Dish Network Corp. (DISH) - Get Report and YouTube TV from Alphabet Inc. (GOOGL) - Get Report .

Collectively, the streaming pay-TV platforms amount to "one big yawn," Bank of America Merrill Lynch media analyst Jessica Reif Cohen said earlier this month. That's great news for Netflix and its strategy of investing heavily in original content found only on its relatively inexpensive service.

Complicating matters for Hulu is the harsh reality that all four of its owners are planning to launch their own direct-to-consumer services in the not-too-distant future. Most prominently, Disney plans to start a separate subscription service for ESPN early next year and then a very ambitious all-everything streaming platform featuring content from its Pixar, Marvel and Lucasfilm units sometime in 2019.

Hulu, like Netflix, must also contend for audience attention with Inc. (AMZN) - Get Report , which can be expected to increase its content spending in the year ahead. It's not unreasonable to assume that Amazon's ability to choose and acquire winning programming will improve over time. 

The question for Hulu becomes strategy and commitment. Will it continue to be a clearinghouse of sorts for its four major owners, or will it acquire more content like "The Handmaid's Tale" to differentiate itself for an ever-growing number of video subscribers?

Mike Hopkins may have just voted with his feet. The former Hulu CEO took the top job at Sony Pictures Television earlier this week as Randy Freer, president of Fox Networks Group and a current Hulu board member, was named the company's third chief executive in the past four years.

Do you have any idea where Stranger Things and your other Netflix favorites were filmed? 

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