Wall Street Analyst Advises Against Hulu Sale

by , Oct 14, 2011, 12:00 AM
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Even before the owners of Hulu said they wouldn’t sell the business last week, a top Wall Street analyst was suggesting a sale would be shortsighted. It might bring a short-term gain, but that would be a pittance compared to the potential long-term loss. 

RBC Capital Markets’ David Bank wrote last Thursday that digital distribution might eventually become preeminent and it would be unwise to cede control of content to a new Hulu owner. He said that a buyer -– a Yahoo, Google, Amazon or Dish –- would likely have demanded the content-providing owners (Disney, News Corp. and Comcast) sign deals of up to four years promising to provide their content.

That’s an eternity in the evolving media landscape. It also echoes CBS’ longtime devotion to maintaining control of its content.

A “meaningful long-term programming distribution agreement” could leave the networks “at risk of losing control of their own destiny in the digital distribution ecosystem, which over time has the potential to be the dominant distribution ecosystem (versus traditional linear cable),” RBC’s Bank wrote.

Bank said that a $2 billion sale of Hulu could have netted the owners $100 million to $200 million each after taxes. (Providence Equity Partners is a fourth owner.)

“Is it really worth it … at the expense of losing control over your own destiny?” he said. “We think the networks are unsure of the answer to that, which has delayed a resolution to the Hulu sale. We also think there is a decent likelihood the networks will abandon the sale process for this reason.”

Bank also raised the point that the networks might have a better opportunity to use Hulu to “build greater brand equity” for themselves as owners, rather than having an outsider whose interests might be less aligned with theirs in control.

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