Best fit
While the owners have received interest from numerous parties, it seems hesitant to part with its valuable content licenses. Still, it seems unlikely that any of the buyers would express much interest without them.
Because the owners are mostly interested in increasing the value of the content they create, they are likely less interested in selling to companies with which they already have licensing deals. This leaves two big names that have expressed interest – Yahoo! Inc. (NASDAQ:YHOO) and Microsoft Corporation (NASDAQ:MSFT).
Marissa Mayer’s new mobile focus for Yahoo has put the company at the forefront of the mobile acquisition game. While Hulu isn’t a pure mobile play like many of Yahoo’s recent acquisitions, mobile video is increasingly popular. While the company is already in talks with France Telecom about acquiring a 75% stake in DailyMotion, Hulu provides a much bigger bolster in an area where Yahoo lags behind the competition.
But Hulu doesn’t quite fit into Marissa Mayer’s MO. Her recent acquisitions of small mobile startups are usually less than $100 million. A Hulu buyout would require billions. With just over $2.5 billion of cash on the balance sheet, the company would likely need to finance the acquisition with debt in addition to the content licensing obligations the buyout necessitates. While Yahoo could certainly afford to take on additional debt, it doesn’t appear to be the direction Mayer wants to take the company.
Microsoft provides another name that has long held interest in video streaming as it transitions its Xbox brand from a gaming system to an entertainment hub. Multiple rumors of a Netflix, Inc. (NASDAQ:NFLX) buyout often link Microsoft as a potential suitor.
Hulu could be a nice consolation prize for Microsoft, and become extremely additive to its Xbox Live service, for which the company is already developing original content. Bundling Hulu Plus service with Xbox Live would certainly help move systems, and further establish Microsoft’s presence in the living room as an entertainment hub.
Additionally, there’s potential that Newscorp and Disney would agree to sell to Amazon. Hulu would be extremely synergistic with Amazon’s Prime service, as the company already has licensing deals that overlap with a lot of the content on Hulu. If the owners refuse to include a large portion of the licensing deals that provide the value of Hulu, Amazon.com, Inc. (NASDAQ:AMZN) is likely their best opportunity to sell.
An Amazon.com, Inc. (NASDAQ:AMZN) takeover, however, seems to me the least likely of cases as the content providers want to increase competition and bidding on their main product. They’d be better left keeping Hulu under their wings, and licensing content to the company at the family discount.
One other solution
Another solution would be for Newscorp or Disney to buy out the other’s stake in Hulu. This would provide the company with a unique outlook for its future monetization policy while maintaining the level of competition in the video streaming market.
The owners can take their time, however, deciding exactly what to do as Hulu’s growth doesn’t appear to be slowing down. It’s clear, though, that Hulu’s revenue is rather inconsequential to these big media companies, and it will likely do better without the company holding back potential licensing agreements.
The article Who Could Buy Hulu? originally appeared on Fool.com is written by Adam Levy.
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