Does Steve Jobs Want Hulu?

by Steve Smith, Jul 22, 2011, 12:51 PM

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Hulu is turning out to be one of the most wanton debutantes in recent digital M&A history. Determined to sell itself, the TV-heavy video subscription service is being shopped around by Morgan Stanley and Guggenheim Partners with a reported valuation of about $2 billion. Now, Bloomberg reports that Apple is among the interested parties, which already include Google, Yahoo and AT&T.

Apple? Really? Apple generally doesn't buy content so much as the technology that best distributes content. Given Apple's interesting position already vis a vis the entertainment content industry, this would make for a curious wrinkle. The company has had a checkered history with music, TV, film and print companies in luring their content into its models. For music, the company is now in a position of great power to dictate terms simply by virtue of the sheer volume of music iTunes sells. With video rentals and sales, not so much. When Apple TV 2 launched last year, the streaming model that put 99-cent prices on all TV episodes left many networks on the sidelines. Even now, arguably, access to TV episodes is broader and certainly cheaper on Netflix and Amazon. Just on the level of deal cutting, it would be interesting to see what a Hulu acquisition would do for Apple's overall leverage with entertainment companies.

From a user's perspective, I am all for it. Apple clearly needs a subscription service of the kind Hulu Plus offers. Almost all industry projections for over-the-top video see the lion's share of revenue coming from subscription fees rather than one-off purchases and rentals. The 99-cent episode rental seems like a good impulse buy on occasion, but in my use of on-demand TV I find services like Netflix, HBO Go and even Xfinity best for experiencing a missed series. I am working my way through the full run of HBO's The Wire and BBC's Sherlock right now, but I would blanche at piling up a per-episode cost for each. Apple TV is very good at a la carte viewing, and it has on board access to Netflix. But integrating a subscription service and deep TV library like Hulu's with the rest of the Apple TV system would be a great service and force Apple to rethink its interface. 

Ultimately Apple as a company needs to decide how closely it wants to tie itself to content. After all, as we have seen, Hulu is heavily dependent on the whims of networks in granting rights. In order to put itself up for sale, the company had to secure guarantees from its suppliers. According to Bloomberg, Disney, News Corp and Comcast/NBCU were offering bidders a five-year extension of program rights in the system and even a two-year exclusive access privilege. Combining Apple TV and Hulu would make for a powerful competitor to Netflix. Of course an Apple deal could be bad news for all of those other device companies that currently carry Hulu, like the game boxes and connected TVs. Apple might want to pull the plug on those distribution channels in order to leverage Hulu for its own Apple TV set-top box, iPhone, iPad and eventually a full featured TV with the Apple brand.

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0 comments on "Does Steve Jobs Want Hulu?".

1. Robert McEvily from MediaPost
   

   commented on: July 22, 2011 at 2:18 p.m.

   Remind me to talk to you about "The Wire" next time I see you! Outstanding!

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