DirecTV (DTV), Yahoo! Inc. (YHOO), Time Warner Cable Inc (TWC): Hulu Bidding War…Here’s Why These Companies Might Want It

Most people probably don’t see YouTube as playing in the same arena as Hulu, although perhaps they should. There are already TV shows that have been created for YouTube (Julia Stiles’ Blue), and Google Inc (NASDAQ:GOOG) has just begun to let its content creators sell subscriptions to their channels.

If Yahoo! was to acquire Hulu, it might push it down a similar path, building it up as the video portion of the new Yahoo! Inc. (NASDAQ:YHOO).

Private equity would probably push it as a true Netflix rival

With a price-to-earnings ratio well over 500, Netflix, Inc. (NASDAQ:NFLX) may be overvalued. Nevertheless, the company’s current market cap of just under 13 billion is more than 12 times greater than Hulu’s $1 billion price tag.

If a group like KKR or Silver Lake Partners were to buy Hulu, they might retool it as a true Netflix alternative, adding original programming and bringing on new content deals.

If they could get Hulu’s subscriber base anywhere near Netflix’s 30 million, they could conceivably take it public in several years at a multi-billion dollar valuation.

Hulu as an asset

Overall, given the immense interest that Hulu has seemingly generated, it’s clearly a fairly valuable asset. In particular, if one believes that cord cutting is poised to take off in the future, it could change the investment outlook of the company that acquires it.

For traditional paid-TV providers, it offers the ability to break into, or enhance, their online offerings. For Yahoo! Inc. (NASDAQ:YHOO), it would give the company a video arm. And for private equity, it might mean a big win, particularly if Netflix remains so richly valued.

The article Hulu Bidding War: Here’s Why These Companies Might Want It originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends DirecTV. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.