Most likely contenders
Yahoo! Inc. (NASDAQ:YHOO) and Google Inc (NASDAQ:GOOG) are the most likely to buy Hulu. Currently, Yahoo! Inc. (NASDAQ:YHOO) is operating an acquisition-based business model, which is something I cover more thoroughly in an article I have recently written. Google Inc (NASDAQ:GOOG) could also be a contender, as it previously offered to buy the company just two years ago.
Yahoo! Inc. (NASDAQ:YHOO) still has $4.1 billion in short-term investments and cash on its balance sheet, and it is projected to generate around $1.25 billion in profit this year. So it can easily add to the size of its bid just from the income it generates from operations. Yahoo! may crank up the size of its bid to push private equity and cable operators out of the room.
Some say Yahoo! needs this deal with Hulu, as it doesn’t own a truly compelling web property in the video space. Thus far, creating video streaming under the Yahoo! Inc. (NASDAQ:YHOO) umbrella has been unsuccessful, as Yahoo! Screen has failed to garner a substantial user base. Yahoo! is fairly compatible with Hulu, and it’s highly probable Hulu’s management would like a deal with Yahoo!.
And then there’s Google Inc (NASDAQ:GOOG). Google wouldn’t mind adding to its market position in video streaming. The company is offering better compensation practices for individual studios on its YouTube channel platform, and the purchase of Hulu would nicely tie into that. Think about it; Hulu is a paid for content streaming service that could eventually buy content from YouTube and its various channels. This could lead to even better content going forward.
For now, Google Inc (NASDAQ:GOOG)’s YouTube channels are priced at $1.99 a month which makes them competitive with both Hulu and Netflix. These same channels will also be able to monetize through advertising. And while the success of this strategy is yet to be determined, Google remains interested in Hulu. And with $50 billion in short term assets, it has the cash to pull a deal off without a hitch.
Conclusion
Of all the companies mentioned, Yahoo! Inc. (NASDAQ:YHOO) and Google Inc (NASDAQ:GOOG) seem to be the best fit for Hulu. If Yahoo! were to succeed in acquiring Hulu, it would be Marissa Mayer’s best acquisition to date as it gives the company a real foothold in paid-for content streaming. Likewise, a match with Google would give it a turnkey paid for content streaming channel that could eventually surpass YouTube.
The article Who Will Buy Hulu? originally appeared on Fool.com and is written by Alexander Cho.
Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends Google and Walt Disney. The Motley Fool owns shares of Google and Walt Disney. Alexander 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.
