Which Hulu Partner Is Really Smiling Now?

Ask yourself what News Corp and Walt Disney Co. are up to by not selling Hulufor the second time in two years. You might not have a clear answer.

To many, it seemed there was much indecision by Hulu’s three owners -- which includes Comcast, in addition to News Corp and Disney -- who could have walked away with some $1 billion.

Perhaps News Corp and Disney -- the two owners with voting rights on any sale -- did not want to give DirecTV, one of Hulu’s bidders, any more leverage.  Perhaps they also didn’t want to abandon a digital video advertising business that brings in $700 million a year.

In addition to DirecTV, other TV distributors -- AT&T, in partnership with Peter Chernin (now a producer, and an architect of Hulu while at News Corp), and Time Warner Cable -- were in the hunt. Of Hulu’s bidders, only media investor Guggenheim Partners didn’t have a specific TV distribution connection. 



Was there a worry that Hulu could be resold to a competitor that didn’t meet the approval of its current media content owners? Could Hulu have been developed into a strong TV distribution player, thus making it hard for the content owners to control it?

From the current content owners’ perspective, it’s tough not to want to maintain control, especially in a world of consistent carriage war negotiations and threatened carriage blackouts.

The argument for selling Hulu was that the content owners could sell their programs at perhaps higher prices to Hulu’s competitors like Netflix and YouTube. Now their revenues from those outlets might be limited.

The key for any Hulu buyer would have been what advantages it would have had post-sale regarding still highly desirable TV network programming? That was the sticking point two years ago for potential buyers, and maybe something News Corp and Disney have still not figured out – or aren’t comfortable with.

A nightmare scenario could have found Hulu’s current media content owners, perhaps five years in the future, ruing the day they gave up a promising digital video platform business.

This is especially true now that digital video advertising continues to outgrow other digital advertising formats. Not only that, but in the digital video category, Hulu gets the highest CPMs for the dominant video format -- pre-roll. Any wonder then that Hulu now wants to up its ante in the business by spending $750 million for capital improvements?

At the end of the day, big media might wonder: If they ever had the chance to turn back the clock in the TV business, what would they have changed? Would they, for instance, have taken some ownership of big TV distributor businesses  -- like cable, satellite, or telco -- to complement their content businesses?

Wait, doesn’t Comcast -- the Hulu partner with no voting rights in Hulu’s possible sale --  own both content and a big TV distribution system?

Hmm.  I’m guessing the executives at Comcast are smiling today.

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