updated 09:00 pm EDT, Mon September 19, 2011
Co-owners may renege if bids not large enough
Multiple issues may conspire to derail the auction of popular online streaming video site Hulu even before it gets underway in earnest -- including moves by NBC Universal, deliberate vagueness about exactly what bidders will be getting, a large gap between what the initial round of bids produced and what the co-owners expected, and a reticence from Hulu's board to fully commit to a sale. The perceived value of the deal appears to be dropping rapidly, sources say, due to the complications.
Hulu is co-owned by News Corporation, Disney, Comcast's NBC Universal and Providence Equity Partners, who appear to collectively believe the company is worth considerably more than the $500 million to $2 billion that was pledged in the first round of bidding, which included offers from Amazon, Google, DirectTV and Dish Network. Yahoo was seen as a strong potential bidder until it's management implosion two weeks ago sidelined its attractiveness as a buyer. Rumors of Apple and Microsoft being potential bidders have, thus far, not materialized.
Part of the problem is determining how much Hulu itself -- once divorced of its content-provider partners -- is actually worth. Though the current owners say the content deals will remain in place, NBC Universal -- who own a stake in Hulu but are forbidden from participating in key management decisions -- recently began offering its own content for free via iOS apps without requiring a cable subscription, undermining some of the value of the rights Hulu includes as its assets. The move also puts NBCU at odds with Disney and News Corporation, who are known to want Hulu access to be dependent on a pay-TV subscription.
As CBS head Les Moonves put it to Reuters, "what are they getting and [for] how long are they getting it?" The CBS executive -- who's company is not involved in Hulu -- points out that a number of current Hulu deals are set to expire in around two years, potentially leaving the service with little content in the near future, coupled with ambiguities about existing rights for content on emerging platforms such as the iPad and other mobile devices.
Companies that already have plenty of their own content or content deals -- including Google and the satellite TV providers -- are seen as not being as dependent on this aspect of Hulu and want instead to buy it to gain access to an existing infrastructure for online television, complete with a large audience.
The auction of Hulu follows a withdrawn IPO offer that saw the company appraised as being worth about $2 billion. If the next round of bidding does not substantially surpass that figure, the co-owners may opt to abandon the sale entirely.