DIRECTV (DTV), Yahoo! Inc. (YHOO): Jumping Through the Hulu Hoops

DIRECTV (NASDAQ:DTV) could certainly use Hulu to help reach a large Internet audience for much lower overhead costs than DIRECTV’s traditional line of satellite dish operations. The satellite TV industry as a whole is no longer a growth industry as cable-cutting and the popularity of online content has been on the rise. DIRECTV has been doing fairly well in 2013 and would increase financial flexibility, produce better operating margins, and become more competitive with Dish Network if it gets hold of Hulu. If DIRECTV loses out to Time Warner Inc (NYSE:TWX) or another company, DIRECTV (NASDAQ:DTV) investors can take solace in the fact that, as of now, DIRECTV appears to be holding its own even as more traditional forms of cable are slowly starting to lose their luster.

Yahoo! Inc. (NASDAQ:YHOO) is perhaps the most intriguing suitor to Hulu. Yahoo! has been on an interesting run-up under the helm of former Google employee Marissa Mayer. The company has bought various smaller companies and services, and recently acquired the popular website Tumblr. Although Tumblr is popular, it appears that monetizing Tumblr will prove difficult at best for Yahoo!. Hulu would most likely benefit Yahoo!, as the company would be able to provide its users with another area of online content and give them a key reason to continue visiting the website. Yahoo! Inc. (NASDAQ:YHOO) would open up a new front of competition on itself, however. If Yahoo! does buy Hulu, it would go head to head with Netflix. Considering that DIRECTV (NASDAQ:DTV) is a $27 billion corporation versus Yahoo!’s $4 billion, DIRECTV has a much larger war chest that it can utilize to help promote Hulu than Yahoo! does. DIRECTV would probably be able to more effectively monetize Hulu than Yahoo! Inc. (NASDAQ:YHOO).

Bottom line

Hulu has demonstrated a strong propensity to grind out profits and boost its subscription base. Whoever ends up with Hulu will pose competition to Netflix in the United States and keep Netflix’s feet to the fire. DIRECTV would be able to develop Hulu and reach audiences quicker than Yahoo! would be able to due to DIRECTV (NASDAQ:DTV)’s stronger current corporate structure. Hulu would also benefit DIRECTV in more tangible ways than it would benefit Yahoo! Inc. (NASDAQ:YHOO), since a Hulu purchase would transition DIRECTV into more of an internet company.

Evan Buck has no position in any stocks mentioned. The Motley Fool recommends DirecTV and Netflix. The Motley Fool owns shares of Netflix

The article Jumping Through the Hulu Hoops originally appeared on Fool.com.

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