Hulu Still Flirts With Time Warner Cable
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