Did Time Warner Cable Torpedo DIRECTV's Hulu Bid?
Washington, D.C. (July 15, 2013) - This is an update on our earlier coverage of the effort to buy entertainment streaming service, Hulu. (See earlier articles below.)
Several hours after the announcement last Friday that Hulu's owners had decided not to sell the streaming service, Bloomberg reported that Time Warner Cable was seeking to invest in the company.
It's unclear how much the cable operator is willing to invest, but earlier reports said it wanted to buy 25 percent of Hulu, allowing its current owners (Disney, News Corp., and NBC Universal) to stay in control with a lot more money to devote to marketing and programming.
Combine a Time Warner Cable investment with the owners' investment of $750 million of their own money into Hulu and it's suddenly easy to understand why they didn't sell the streamer to DIRECTV or the AT&T/Chernin Group, both of which reportedly offered more than $1 billion.
The infusion of capital will permit Hulu to purchase more content, both older programming and original shows, so it can more effectively compete with the king of streaming, Netflix. So Hulu's owners concluded that their asset had become more valuable than the $1 billion offered by DIRECTV and AT&T/Chernin.
Anyone who has been watching the Hulu auction process should not be too surprised by how this turned out. One could argue that this was Time Warner Cable's plan all along.
The cable operator was originally one of seven bidders for Hulu, along with DIRECTV, AT&T, Yahoo and all the rest. But a Bloomberg report on July 9 revealed a new strategy: Time Warner Cable suddenly wanted to just invest in the company.
The cable op's willingness to invest significant cash in Hulu rather than own it changed the face of the negotiations. The owners realized that they didn't need to sell, which made it more difficult for the bidders to be taken seriously. In fact, the owners' delay in making a final decision on the multiple bids spoke volumes on how seriously they were not being taken. They had decided to go another way and it was just a matter of time before it would be announced to the world.
After Time Warner Cable shifted strategies, DIRECTV and AT&T/Chernin probably never had a chance.
It's unclear what Time Warner Cable wants from a Hulu investment. There has been talk that the cable op would be a gatekeeper of some version of a TV Anywhere service with Hulu at the center. Hulu now has more than four million subscribers and Time Warner Cable may also be interested in tapping them somehow as well.
But what is clear to me this morning is that without Time Warner Cable's investment offer, the odds are good that DIRECTV today would be the new owner of Hulu. Most news reports say the satcaster was the leading bidder, offering both more money and more resources than AT&T/Chernin.
But now DIRECTV will have to find a new online strategy.
Below is our earlier coverage of Hulu's decision not to sell.
Hulu Owners Call Off Sale
Washington, D.C. (July 12, 2013) - Hulu's owners today announced that they have called off its sale and instead will invest $750 million in the entertainment streaming service, ABC News reports.
DIRECTV and a partnership of AT&T and The Chernin Group reportedly had made bids of more than $1 billion for Hulu, which has more than four million subscribers. But the decision of the Hulu ownership group, which consists of News Corp., Disney and NBC Universal, might suggest it was not happy with the bids.
Hulu was put up for sale in 2011 and the ownership group took it back at that time as well.
ABC quotes Fox President Chase Carey as saying the decision to keep Hulu was the "best path forward" for the streamer.
Below is our earlier coverage of Hulu's bidding process.
Could Hulu Sale Kill The Best Reason to Subscribe?
Washington, D.C. (July 12, 2013) - Hulu Plus has more than four million streaming subscribers and one of the chief reasons they have signed up is the service's offering of next-day programming from the broadcast networks. If you missed a show last night, check out Hulu Plus; there's a good chance it will already be available there. Also See:
But former Disney chairman Michael Eisner said yesterday that he believes that the new owners of Hulu will lose the right to offer next-day broadcasts. Although DIRECTV and a group consisting of The Chernin Group and AT&T have separately offered more than $1 billion for Hulu, the winning bidder could wind up with a Hulu streaming lineup that's not as attractive as the current one.
Eisner told Bloomberg Television that he considered bidding for Hulu but apparently was put off by the current owners' (News Corp., Disney and NBC Universal) insistence on watering down the programming offering.as ground rules for the sale. The owners will be unwilling to offer their programming for next-day viewing because they will no longer own the service.
The former Disney chief says the new Hulu owners, whoever they may be, will likely have to pursue a new strategy, converting Hulu to something closer to Netflix, which offers a mix of older programs and movies and now original programming.
"If it bought by a content-oriented production kind of company, it will then move from a company that is basically repeat broadcasting to original broadcasting," Eisner told Bloomberg. "That is very expensive. Therefore, the price you pay for the actual asset will be tempered by what you think you have to spend to make that asset work because NBC, Fox (News Corp.) ABC (Disney) are not going to give you a great deal anymore on their own content."
Hulu's owners are expected to make a decision on the sale in the next few weeks. (It's also still possible that they will hold on to the service and bring in Time Warner Cable as an investor.) But Eisner's sentiments, which are shared by others in the industry, could suggest the winning bidder will have a most difficult challenge on its hands if it seeks to challenge Netflix. In mid-stream, forgive the pun, the new owner would have to transform Hulu from what it is today to at least a different service, one that could alienate current subscribers.
"The thing they (current Hulu owners) are selling it as is near-term repeats of network programs," Eisner said. "The sellers, Disney and the other two owners, are selling it and taking away basically the next-day availability of their content."
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