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Big Media Ups SVOD Acquisition Rumors

1 Feb, 2016 By: Erik Gruenwedel

With Netflix’s global reach, Amazon Prime Video’s burgeoning profile, and Hulu’s corporate co-owner-driven mandate (i.e. Rupert Murdoch), subscription streaming video’s top three players are driving home entertainment — and defining consumer behavior.

Now, big media and tech want in on the market land grab. And if you can’t beat the competition, acquiring it can be just as sweet.

Over the weekend, a Forbes writer suggested Apple acquire Netflix, a fiscal transaction the iTunes/iPhone/iPad creator could easily afford in light of its $200 billion in available cash at the end of the fiscal fourth quarter.

Separately, Time Warner, which owns Warner Bros., HBO and Turner, reportedly is considering a sizable ownership stake in Hulu depending on conditions, which include stacking rights to current-season TV programming. Warner Bros. Television is one of the largest developers of episodic programming.

While a reluctant fan of SVOD, Time Warner CEO Jeff Bewkes has long raised warnings about the impact low-cost, smorgasbord video streaming could have on a transaction-based industry. Last year, Bewkes said Warner would considering holding back licensing content to SVOD (notably Netflix) upwards of a year in order to help facilitate alternative proprietary streaming channels (i.e. HBO Now) and pay-TV (i.e. TV Everywhere).

With cord-cutting no longer a buzzword for alarmists, but rather a quantifiable market segment, Bewkes and others would like to be at the over-the-top video controls should the pay-TV ecosystem wither.

Forbes contributor Jay Somaney believes Apple could acquire Netflix outright for upwards $70 billion, a move he said would put Netflix “miles ahead” of Hulu, Prime Video, HBO Now and Chinese e-commerce giant Alibaba. More importantly, Netflix’s global license rights and market prowess would enable Apple to avoid content licensing issues that have have stalled a planned reboot of Apple TV.

Studios and related content holders remain mindful of the fallout from iTunes, which singularly replaced the music album market with the single. That was a mere stepping stone to music streaming, which now dominates the industry and has sent many artists back on tour to make a living.

“A takeover of Netflix will save Apple many quarters, if not years worth of negotiating time,” Somaney wrote.

21st Century Fox chairman Rupert Murdoch has watched Netflix’s global expanse and seethed inside. With Fox — not Disney or Comcast — the corporate driver behind the wheel of Hulu (former Fox executive Mike Hopkins was installed as CEO), the SVOD company has spent lavishly to acquire exclusive rights to “Seinfeld,” “Brooklyn Nine-Nine,” “The Mindy Project,” “Keeping Up With the Kardashians,” “Top Chef,” “Empire,” “Sleepy Hollow,” and “Flipping Out,” on top of a slate of original programming.

Hulu also took over from Netflix a movie-license deal with Epix. Fox-owned FXX acquired all syndication rights (including streaming) to “The Simpsons”. Last month, Hulu inked a deal with Sony Pictures for catalog movies and TV shows.

“As an industry, we need a competitor, a serious competitor to Netflix and Amazon,” Murdoch told a tech confab back in 2014.

The investment appears to be working as Hulu ended 2015 with 10 million subscribers, compared with 6 million in 2014. Netflix ended the year with 45 million domestic subs.

Time Warner’s rumored $1 billion investment interest for a 25% stake in Hulu includes the same caveat for Netflix, namely that current-season episodes (i.e. stacking rights) remain off limits, according to The Wall Street Journal

“If everybody in the industry is worried about Netflix driving cord-cutting, shouldn’t they be just as worried about Hulu?,” Anthony DiClemente, analyst with Nomura Securities, wrote in a note.


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