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Media Companies Jumping the Gun on Hulu Sale?

23 Aug, 2011 By: Erik Gruenwedel

BTIG Research analyst Richard Greenfield says Hulu owners Disney, News Corp. and NBC Universal are sacrificing long-term value for immediate profits

With initial bids for Hulu reportedly due Aug. 24, one analyst questions why owners of the popular online repurposed TV program aggregator are selling. Media reports range the winning bid from $500 million to $2 billion.

Richard Greenfield, analyst with BTIG Research in New York, said with Hulu’s growing pains largely behind since its 2008 launch, the streaming service’s evolving objectives — such as revenue, profit, leveraged ads and recognized brand — should not be construed as an assault on traditional revenue or distribution models, including syndication, pay-TV and retail.

Indeed, Hulu now attracts nearly 28 million monthly viewers a month, or 160 million viewer sessions and 200 minutes per viewer. It is on pace to generate $500 million in revenue this year. And Hulu Plus, the $7.99 monthly subscription-based antidote toward SVOD behemoth Netflix, is poised to reach 1 million members by the end of the summer, according to a July blog post by CEO Jason Kilar.

Greenfield said that in the era of superfluous advertising on network TV, burgeoning DVR use (to watch on individual schedules and skip ads) and social media, Hulu represents the perfect hybrid of technology and traditional advertising models to succeed.

“When you think of these three concepts, Hulu appears to be the perfect weapon for networks/content creators to embrace so they can grow revenues and profits, even if the current multichannel ecosystem becomes unglued over the next decade,” Greenfield wrote in an Aug. 23 blog.

But media companies such as CBS Corp. remain leery. CEO Les Moonves repeatedly has said he is opposed to licensing content to Hulu, opting instead for SVOD services such as Netflix and Hulu Plus. Moonves said he remains committed to traditional distribution models (ad-supported networks, syndication and pay-TV) — a reality he said is based simply on the incremental revenue they generate.

Arash Amel, research director with IHS (formerly Screen Digest), questioned the value related the final cost suitors such as Amazon, Google and others might pay for Hulu compared to the accompanying value of the content. That’s because Hulu remains a technology platform and not content creator. It is dependent on its owners and third-parties licensing programming for streaming.

“If you had those deals for 10 years, OK, you have time to build a business,” Amel told the Los Angeles Times. “But look at what [studios] are trying to do to Netflix. They help you until you are successful, then they want most of what you make or they try to kill you.”

Indeed, Chase Carey, COO of News Corp., said he said he is on the fence about selling Hulu. In the company’s most recent fiscal call, Carey, mirroring comments made about not jeopardizing long-term value of 20th Century Fox content for the quick dollar licensed to Netflix, said the endgame hadn’t been written.

“For us, it’s still a decision to see what it looks like at the end and if it makes sense to pursue that path or make does it make sense to continue an ownership position and have it continue to be driven by content owners,” Carey said.


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