Owners call off Hulu sale, to inject cash instead
Jul. 12, 2013
LOS ANGELES (AP) — The on-again, off-again sale of Hulu is off — again.
Hulu's owners, 21st Century Fox, Disney and NBCUniversal, said Friday that they will remain owners of the online video service, while providing a cash infusion of about $750 million to ensure its future growth.
The owners accepted formal bids for Hulu as recently as last week as part of their second attempt in three years to sell the company. But Friday's announcement suggests the bids were too low. Reports pegged the high end of bidding around $1 billion, which is half of what Hulu was valued at when the existing owners bought out Providence Equity Partners' 10 percent stake for $200 million in April 2012.
Among the bidders were DirecTV as well as AT&T in partnership with a group led by former Fox executive Peter Chernin. Time Warner Cable Inc. was reportedly interested in buying a stake in Hulu, rather than taking it over completely.
21st Century Fox President Chase Carey said in a statement that taking Hulu off the market is the "best path forward."
"We had meaningful conversations with a number of potential partners and buyers, each with impressive plans and offers to match, but with 21st Century Fox and Disney fully aligned in our collective vision and goals for the business, we decided to continue to empower the Hulu team, in this fashion, to continue the incredible momentum they've built over the last few years," he said.
21st Century Fox last month split from News Corp., which maintains the conglomerate's publishing assets. Hulu's other owners are The Walt Disney Co. and Comcast Corp.'s NBCUniversal. Comcast is a silent partner as a condition of its purchase of NBCUniversal in January 2011.
Hulu, which carries older movies and recently aired TV shows from Disney's ABC, Fox, NBC and other networks, has more than 4 million paying subscribers to its Hulu Plus premium plan. The $8-a-month plan allows greater access to back episodes and lets viewers watch content on multiple devices like mobile phones, tablet computers and game consoles. A free version of Hulu only allows viewing on computers. Both versions come with ads. Last year, the service generated about $690 million in revenue, but it wasn't profitable.
The end of the sale process still leaves open the possibility that Time Warner Cable or other interested TV industry players will take a stake in Hulu, according to a person familiar with the matter, who was not authorized to comment publicly.
The person also said the announcement suggests that both the free and paid versions of Hulu will continue.
The injection of funds from the owner companies will go toward programming, marketing, technology and expansion costs, the person said.
Currently, Hulu has a hodge-podge of offerings. Fox, for example, provides next-day access to recent TV episodes, but only to people who subscribe to regular pay TV. It makes other viewers wait eight days before they can see recent reruns.
ABC and NBC do not impose such a wait.
The broadcast networks also offer full episode viewing for free on separate apps on mobile devices. On its app, NBC doesn't require viewers to prove they are pay TV subscribers, but Fox does. ABC requires proof for live TV viewing on its app, but not for reruns.
If the networks aligned their strategies, next-day access on Hulu could be touted as one of the benefits of paying for a traditional TV subscription. Tying online access to a regular TV subscription is part of an industry initiative called "TV Everywhere." But that initiative is marred by inconsistency across shows, networks and TV providers.
One issue with the various bids for Hulu was that many were dependent on the length of time that buyers could retain access to content at current prices. Networks tend to hike prices when agreements lapse. Maintaining the current ownership adds some stability to Hulu's content offering.
The announcement came during an annual retreat for media moguls in Sun Valley, Idaho, hosted by Herb Allen's private investment firm Allen & Co. Attendees included Disney CEO Bob Iger, DirecTV CEO Mike White, and Fox's Carey. Hulu was the talk of the conference.
News of the move apparently caught some attendees by surprise, including DirecTV's White, said another person familiar with the matter. DirecTV, seen as the leading bidder, had been working on its offer since May and had planned to bundle a DirecTV subscription with Hulu Plus membership.