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Report: Apple May Bid on Hulu

22 Jul, 2011 By: Erik Gruenwedel

Apple could easily absorb $2 billion asking price and level the streaming playing field with Netflix, Amazon Prime and Google

Technology giant Apple Inc. reportedly is considering bidding on Hulu, the online repurposed content streaming service recently put up for sale by co-owners The Walt Disney Co., NBC Universal and News Corp.

Cupertino, Calif.-based Apple is in early talks with Burbank, Calif.-based Hulu, according to a Bloomberg report citing unnamed individuals with knowledge of the negotiations.

Apple, which just reported a record fiscal quarter and has more than $76 billion in cash and cash equivalents, could easily absorb Hulu’s suggested $2 billion price tag. Acquiring Hulu would give Apple a subscription video-on-demand platform with which to compete with Netflix, Amazon Prime and Google.

Apple CEO Steve Jobs is Disney’s largest individual shareholder.

Heretofore Apple has offered movies and TV programs for rent (99 cents) and electronic sellthrough (from $4.99) through its iTunes Store and Apple TV.

“Part of the ecosystem of Apple’s future is to include more video,” Scott Sutherland, analyst with Wedbush Securities in San Francisco, told Bloomberg. “It’s something they are focused on.”

Hulu, which launched March 12, 2008, offers ad-supported largely repurposed TV programs free online. The service became an Internet sensation, much to the chagrin of its media owners, who suddenly saw Hulu’s success as a direct threat to their separate TV syndication and pay-TV distribution strategies.

Indeed, media companies such as CBS Corp. refused to license content to Hulu due to the limited incremental revenue return compared with that of other distribution channels.

Last winter Hulu bowed subscription-based ($7.99 monthly) Hulu Plus, which sought to pacify media companies and generate more quantified incremental revenue. Hulu Plus, which initially didn’t go over well with its user base, has helped the service generate its first profit last year.

“Hulu would add a new element to their arsenal from a streaming and subscription standpoint,” said Gleacher & Co. analyst Brian Marshall.

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