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In 2013 Hulu set new records for revenue, and for the first time ever, Hulu viewers streamed more than 1 billion content videos in a single quarter.
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[Satellite TODAY 06-03-13] In a quest to acquire online video service provider Hulu, "things have heated up quite a bit this week" in a bidding war, said Tuna Amobi, a media and satellite equity analyst with Standard & Poor’s (S&P), in an exclusive interview with satelliteTODAY.com.
Indeed, the competition has intensified this past week with offers reaching the $1 billion mark from DIRECTV, Time Warner Cable or Yahoo to purchase Hulu, according to sources familiar with the bids.
Hulu broadcasts online content ranging from TV shows and clips to full-length movies. The content stems from nearly 500 companies, including FOX, NBCUniversal, ABC, The CW, Univision, Criterion, A&E Networks, BBC, Lionsgate, Endemol, MGM, MTV Networks, Comedy Central, Nickelodeon, National Geographic, Paramount, Sony Pictures, and Warner Bros. Several of the materials are available to consumers at no cost, while other premium (Hulu Plus) content is only available through a subscription service at $7.95 per month. Hulu Plus currently has over 4 million paid subscribers, according to a blog post from Hulu’s Acting CEO, Andy Forssell. Hulu’s revenue reached $695 million in 2012.
Among the list of bidders is DIRECTV, the second largest U.S. Pay-TV content provider, which currently has 20 million U.S. subscribers and a total of 36 million subscribers including its Latin America market, according to Robert Mercer director of DIRECTV’s public relations.
Although Mercer and representatives from Hulu declined to comment on the bids, Bloomberg news reported Friday that Hulu’s board had been weighing at least seven buyout offers and intends to narrow those to three or four in a just a few weeks. The involvement of a satellite services provider in the auction arena was something some industry analysts did not expect.
“I was surprised they [DIRECTV] are jumping into the action,” Amobi said noting that he doesn’t see a strategic rationale that’s very compelling.
But Todd Mitchell, an analyst with Brean Capital, disagrees with Amobi. “Putting together a satellite platform [DIRECTV] and an over-top the top content provider [Hulu] offering an on demand makes sense,” Mitchell said.
Amobi, however, believes DIRECTV’s buying strategy may be more of a defensive tactic. “The end game may be some sort of defensive play to protect their core satellite business. Buying Hulu could potentially help them [DIRECTV] in defending their traditional Pay-TV service,” Amobi said.
As far as the other bidders, Amobi said Yahoo is coming from a different place while Time Warner Cable’s strategy is likely similar to DIRECTV’s. “Cable and satellite guys look at Hulu at a slightly different perspective than Yahoo – as more of a content play. At the end of the day, their business is in a more traditional aggregator mode, just as we see Netflix and Amazon.com becoming much more viable players in their respective markets,” Amobi said.
Lauren Armstrong, a spokesperson for Yahoo, declined to comment.
Meanwhile, Amobi believes Yahoo might be in the best position to come out on top of the bidding war. “I’m not sure the Pay-TV guys are in the best position to help sustain Hulu. Yahoo can do more with an asset like that,” he said.
Mitchell agreed noting that Yahoo may be more of a serious of a bidder than DIRECTV. “I think DIRECTV is not among the more aggressive bidders,” he added.
But both Mitchell and Amobi have said they could also see benefits to a satellite and Hulu partnership. “This could help improve the bundle,” Amobi said.
Despite the acquisition talks heating, Amobi said plans have been in the works for weeks, “but none of the companies [bidding] have confirmed anything.”
In the meantime, Bloomberg reported that bids of at least $1 billion increase the odds that Hulu’s owners, Walt Disney, News Corp., Comcast, and NBC Universal will sell Hulu after a previous attempt and plans for an initial public offering were unsuccessful. Back in July of 2011, Bloomberg reported that DIRECTV’s competitor, Dish Network, actually had its eyes on Hulu for quite some time and even signed a non-disclosure agreement to investigate the financials of Hulu.
Follow Steve Schuster on Twitter @stevenschuster
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