The “For Sale” sign for Hulu is up again, as the company has attracted the attention of several bidders who have shown interest in buying the company. Three of the top names include Yahoo! Inc. (NASDAQ:YHOO), DIRECTV (NASDAQ:DTV), and AT&T Inc. (NYSE:T). I’ll examine the attraction behind Hulu and how acquiring the company could impact these three bidders.
Hulu, an internet darling
Interest in buying Hulu is not new; the company drew offers two years ago from Google Inc (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), Yahoo!, and DISH Network Corp (NASDAQ:DISH), which eventually fizzled when then-owners Disney, News Corp., and Providence Equity Partners decided to not sell. Analyst David Bank, from RBC Capital Markets, stated on Bloomberg that the company is ‘an incredibly valuable brand…[and] is arguably more valuable than any of the networks themselves.’ The networks he’s talking about are The Walt Disney Company (NYSE:DIS)’s ABC, Comcast Corporation (NASDAQ:CMCSA)’s NBC, and News Corp (NASDAQ:NWSA)’s Fox.
Two of the current owners, Disney and News Corp., have bumped heads over how to run the company and decided to put it up for sale. A new bidding process started anew this year, as bidders seek to access the site’s online advertising and programming provided to Hulu’s more than 4 million paying customers, the latest number of subscribers for the first quarter of 2013.
For Yahoo!, video is a key component of strategy
Yahoo! Inc. (NASDAQ:YHOO)’s buying spree continues as it sets its sights on Hulu’s video offerings, some of which are offered for free, with additional content offered to its paying subscribers. The acquisition would fulfill Yahoo!’s strategy going forward of investing in the video format its CEO Marissa Mayer considers ‘very important,’ according to All Things D.
Yahoo!’s bid for Hulu is reported to be in the $600 to $800 million range. The price range addresses various circumstances that affect Hulu’s worth, such as the length of content licensing rights and the control current owners have over the media. As long as the quality and amount of content is not disrupted after the buyout, acquiring Hulu could benefit Yahoo! going forward and draw additional users in.
DirecTV deals with cord cutters
DIRECTV (NASDAQ:DTV)’s 20 million subscribers could soon have free or discounted access to Hulu if the company is purchased by the large pay TV provider. By offering content through Hulu, the company can lessen the impact of an ongoing trend among certain customers who leave cable and satellite service due to the high cost. This will benefit DIRECTV (NASDAQ:DTV) in the long-term as more and more content moves to the internet.
DIRECTV (NASDAQ:DTV)s current relationship with Hulu’s present owners can help the company obtain more favorable programming rights than the other bidders, some which are new to the industry. According to Bloomberg, the company is one of three bidders offering $1 billion-plus for Hulu.
AT&T joins forces with production company
AT&T Inc. (NYSE:T) is holding talks with California-based production company Chernin Group about putting forth a joint bid for Hulu. A successful deal between these two would provide AT&T with another option to push programming to additional subscribers beyond its current U-verse service, and Chernin gains even greater financial backing from the telecom giant.
Chernin made an initial bid in the $500 million range, an amount that could likely rise if it agrees to do business with AT&T and as Hulu sorts through the bids coming in. According to Bloomberg, Peter Chernin, who helped start Hulu in 2007, leads the firm. Chernin’s deep pockets and insight into video distribution could help Hulu going forward to compete with rival Netflix. Joining a bidder with this favorable combination can give AT&T Inc. (NYSE:T) an advantage in the bidding process. A figure on the actual bid has not been disclosed yet, but insiders believe that a sale would require a bid in the $1 billion range.
Conclusion
Hulu has proven to be a hot internet property, though its sale does present certain challenges. The company that acquires Hulu can add to its portfolio a company that made $695 million in revenue in 2012 and whose service can be accessed by over 320 million web connected devices in the U.S. The acquisition will also mean assuming Hulu’s $330 million debt load and navigating the often-tricky negotiations surrounding long-term content license deals, which its current Hollywood owners tend to avoid signing.
Of the three companies discussed,DIRECTV (NASDAQ:DTV) and AT&T Inc. (NYSE:T) may hold an edge as long as their bids are competitive with that of other suitors. Their prior relationship in obtaining programming rights from The Walt Disney Company (NYSE:DIS), NBC Universal, and News Corp (NASDAQ:NWSA). may provide some assurance that Hulu’s content does not diminish if the buyout goes through. The company with the winning bid is sure to benefit by adding Hulu and its expanding internet TV service, as long as the content remains relevant to viewers.
Eileen Rojas has no position in any stocks mentioned. The Motley Fool recommends DirecTV. Eileen is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Hulu for Sale, But Who Will Buy? originally appeared on Fool.com and is written by Eileen Rojas.
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