How Much Is Hulu Really Worth? (CMCSA, NWS-A, DIS, AMZN, DTV, GOOG, YHOO, SKM, NFLX)

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The bidding process for the online television service Hulu has taken a strange path.  The bidding has been delayed to the end of this week.  It sure seems as though there is a discrepancy over what this is worth, but that might not be a bad thing actually.

Hulu is owned by Comcast Corporation (NASDAQ: CMCSA) via NBC, News Corp. (NASDAQ: NWS-A), Walt Disney Co. (NYSE: DIS), private equity firm Providence Equity Partners, and the Hulu team.  The bidders are said to include Amazon.com Inc. (NASDAQ: AMZN), DirecTV (NYSE: DTV), Google Inc. (NASDAQ: GOOG), and Yahoo! INc. (NASDAQ: YHOO).  What is interesting is that some have included SK Telecom Co. Ltd. (NYSE: SKM) of South Korea as a bidder.  Others say that is not the case in more recent news.

The fight over values is somewhat confusing and it brings up the idea that the process could either be delayed further or could be cancelled.  The Wall Street Journal said earlier in the week that bids might be as low as $500 million, but Reuters said sellers are looking for $2 billion or so.

Hulu was originally going to raise $200 to $300 million in an initial public offering, which would have come close to the $2 billion value.  Then it changed its IPO plan to focus on subscription models.

Here is what is interesting, and something we have toiled with for valuing Hulu… Do you value it on subscribers or on ads?  Huffington Post showed something that Hulu online advertising was twice as effective as TV.

It seems a bit surprising that Netflix, Inc. (NASDAQ: NFLX) is not considering this.  The company has not really wanted to have an ad-model, and maybe it fears that it would have to bundle the service for free rather than as an upsell.

Hulu Plus is an ad-supported subscription service with current and back season shows from ABC, Comedy Central, FOX, NBC, and MTV to connected devices for $7.99 monthly.  The free Hulu service aggregates some 260 content companies and the company claims some 625 top advertisers.

This sounds a lot like a situation that is not going to end with a mere press release, but we aren’t implying more than what we have seen at face value.  As I am about as anxious as one can be to get away from a PC after work, I am not the person to value Hulu.

JON C. OGG

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