Hulu: sweet deal.
Hulu, the media streaming site owned by Disney, News Corp, and NBCUniversal is reported to be entertaining buyers. Amazon, Yahoo and Guggenheim Partners are named among the bidders. This is not the first time Hulu owners are exploring a sale of the joint venture. They were in talks with Google and several other parties in 2011. The deal was called off for the same reasons that might prevent its sale this time around as well: Lack of consensus among the three major owners (all hold equal stakes) and the reliance of Hulu’s success on content from its current owners. (All content streamed on the site is from channels owned by Disney, News Corp, and NBCUniversal. 2011 bidders were aiming to lock the companies in a contract to provide content after the sale.)
Hulu’s 2012 revenue was $695 million, compared to 2011 revenue of $420 million. Since 2011, subscribers have doubled. If Hulu sells, the price should be higher than $2 billion top bid in 2011. Still, Hulu is minuscule compared to Apple TV and Netflix. The latter has 27 million subscribers — almost ten times the size of Hulu’s user base. A worrying figure, considering Hulu is owned by three of the world’s largest media content providers and has existed since 2007.
Part of the reason for Hulu’s stagnation is its owners’ lack of commitment to the joint venture: Disney made an exclusive deal with Netflix to stream its content instead of looking for ways to use it to boost Hulu subscriptions and viewership. The networks dragged their heels in finding a replacement CEO after Jason Kilar departed in early 2013. (Two and a half months later, the company is still helmed by interim CEO and former senior vice president Andy Forsell.)
The other — perhaps more important — sign is that Hulu has not evolved much since its early days. It’s lone innovation is Hulu Plus (the premium subscription model) — is not exactly groundbreaking, given the explosive changes in the realm of digital media since 2007. The talent lineup for its original programming series to debut this summer pales in comparison to other made-for-the-internet shows that are slowly becoming competitors with traditional TV programming. On Netflix — the House of Cards reboot and the new Arrested Development season are two flagship examples — and Google’s many YouTube channels, to which the Mountain View company will be introducing paid subscriber channels this spring. Indeed, as if in illustration of the declining relevancy of TV content, Google is not bidding for Hulu this time around because it is focusing its efforts on its YouTube channels.
The Hulu situation could be as simple as too many cooks in one kitchen. Achieving consensus from three different sellers is time-consuming, and can hold a company back in an environment of rapid digital evolution. And Hulu’s owners were constantly in fear of this joint venture cannibalizing their business model. (These fears that do not lack justification: Ad sales executives at Fox and NBC repeatedly complained about having to compete with Hulu for advertisers.) But to succeed in its chosen market, Hulu needs to be in the hands — and under the financial control — of someone who is not afraid of the medium.
