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Hulu Still Flirts With Time Warner Cable

In the never-ending saga over the future of Hulu LLC, Time Warner Cable Inc. has emerged an unlikely leading player, while Comcast Corp. may also end up as an unlikely winner.

For the second time in recent years, Hulu cancelled its sale auction on Friday, declining reported bids as high as US$1 billion from DirecTV Group Inc. and the joint team of AT&T Inc. and the Chernin Group. According to press reports, Hulu co-owners 21st Century Fox (a recent offshoot of News Corp.) and the Walt Disney Co. turned down the latest bids because they wanted even more money for the site, while at least some of the bidders balked at paying $1 billion or more because the networks wanted to hold back some of their shows from Hulu and impose other content restrictions.

However, according to Bloomberg, Hulu has not yet given up on all of its media suitors. The news organization reports that Hulu is still considering a deal to sell a minority stake in the business to Time Warner Cable, the second-biggest U.S. MSO.

That move would bring Time Warner Cable into the company as a part owner, alongside Fox, Disney and NBCUniversal LLC (now under the Comcast umbrella), which has no say over Hulu's direction because of regulatory conditions imposed when Comcast bought NBC. That could make for even more interesting boardroom battles over Hulu's strategy going forward.

Hulu has now turned down more offers than the Bachelorette. Since 2011, Google, Yahoo Inc., Dish Network Corp., DirecTV, AT&T and various private equity firms have all fought for the right to buy the popular video streaming site, only to fall short in the end.

In particular, the pay-TV providers have lusted after Hulu because they see it as a valuable asset with vast TV Everywhere potential in their escalating fight against upstart over-the-top (OTT) providers like Netflix Inc. and Amazon.com Inc. The company now claims more than four million subscribers to its premium Hulu Plus service, and has content licensing deals in place with high-level programmers. That explains why Time Warner Cable is so keen on joining the party. (See AT&T Joins Hulu Sweepstakes and Hulu Brings in Billion Dollar Bids.)

Now that they have agreed to retain Hulu, its three co-owners have pledged to pump another $750 million into the business "in order to propel future growth." In one press interview over the weekend, Disney CEO Bob Iger said "the interests of News Corp. and Disney galvanized during the process." Previously, News Corp. had reportedly favored keeping Hulu while Disney wanted to sell it.

In the earlier negotiations, Time Warner Cable was said to be pursuing a 25 percent ownership stake. If that's still the case, Hulu could still be looking at upwards of a $1 billion cash infusion as the online video industry heats up.

If TWC does succeed in buying into Hulu, that would make the two biggest U.S. MSOs partners in the programming venture. That could lead to some interesting developments as well, particularly in the "someday" future when everything goes IP and the big cable operators potentially find themselves competing with each other. But, if Comcast and Verizon Communications could find a way to work together somehow, why not Comcast and Time Warner Cable too?

At the same time, it looks like Comcast is sitting pretty now, even though it still can't play a role in running Hulu. Thanks to the cancelled auction, Comcast has avoided the surely unpleasant prospect of one of its biggest pay-TV rivals, AT&T or DirecTV, taking over the streaming video service and bending Hulu to its will. Instead, Comcast will continue to ride the Hulu wave as Fox, Disney and possibly TWC chart the site's future.

In other words, the Hulu sale story is still far from over.

— Mari Silbey, special to Light Reading Cable and Alan Breznick, Cable/Video Practice Leader, Light Reading

albreznick 7/18/2013 | 9:51:52 PM
re: Hulu Still Flirts With Time Warner Cable Nice. How literary of you. I think Hulu's owners may regret turning down the big bucks, twice. But I don't think they'll regret giving up at least some control to pay TV providers like DirecTV and AT&T. The networks like calling the shots as the world goes multi-screen. And they seem to think they can still find a viable OTT business model on their own.
gconnery 7/17/2013 | 5:11:34 AM
re: Hulu Still Flirts With Time Warner Cable Or, from Tom Merrit: "None of you get the rose, we're keeping it."
gconnery 7/16/2013 | 3:04:59 AM
re: Hulu Still Flirts With Time Warner Cable Obvious headlines:

"Hulu pulls another Lucy"
"Hulu acts out Boy Who Cried Wolf"

If the owners of Hulu want the $5B valuation Netflix is seeing then they should do the obvious--go public. Of course they can't because if they did then Hulu would have to be run for the benefits of its shareholders and customers, not the content companies/current owners. And that's verbotten.

The first Hulu round apparently topped out at that $5B number from Google, of course including guarantees of content licensing rights. The second topped out at $1B. My guess for the third round in a few years: bankruptcy.
Carol Wilson 7/15/2013 | 8:56:19 PM
re: Hulu Still Flirts With Time Warner Cable You have to wonder whether Hulu's owners won't regret turning down $1 billion -- much as the Groupon start-up folks surely wish they had taken Google's money back when. But maybe they are seeing something in the OTT video business that I'm not.
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