Streaming video service Hulu is owned by a consortium that includes Walt Disney Co. (NYSE: DIS), News Corp. (NASDAQ: NWSA) and Comcast Corp. (NASDAQ: CMCSA). This is not the first time that the co-owners have put Hulu on the block, but this time their expectations have been lowered and more bidders are joining the auction.
Before a potential sale was pulled in late 2011, Yahoo! Inc. (NASDAQ: YHOO), Google Inc. (NASDAQ: GOOG), Dish Network Corp. (NASDAQ: DISH) and Amazon.com Inc. (NASDAQ: AMZN) were all contenders for the prize. But Hulu’s owners were seeking a price above $2 billion and were unwilling to grant the buyer exclusive rights to some programming.
The initial bidding this time around is starting well below $1 billion, and includes a few different players, including DirecTV (NASDAQ: DTV), Kohlberg Kravis Roberts & Co. (NYSE: KKR), Time Warner Cable Inc. (NYSE: TWC), Silver Lake Partners and The Chernin Group, an investment and media company run by Peter Chernin, former President and COO of News Corp. at the time Hulu was founded. A report this morning cites sources who say that Chernin is talking to AT&T Inc. (NYSE: T) about making a joint bid for Hulu. Yahoo! remains interested, but Google, Amazon and Dish are not mentioned as possible acquirers.
Hulu brings with it about $330 million in debt and no promise of exclusive programming licensing. The Chernin Group is believed to have entered a bid of $830 million (including assumption of Hulu’s debt).
Each potential bidder has a different goal in seeking to nab Hulu, but whether a price that likely will be north of $1 billion is reasonable is a different question. Hulu makes money on its free, ad-supported programming, but its paid subscription service, Hulu Plus, is a money loser. AT&T, DirecTV and Time Warner probably do not care about that as much as the private equity groups do.
The most interesting potential buyer is Yahoo!. The studios that own Hulu would likely prefer Yahoo! above the other bidders because unlike the cable companies and private equity firms, Yahoo! would need to license more content from Disney, and the rest in order to make money from Hulu.
Hulu probably will not attract the $2 billion price that its owners sought in 2011, but it is a highly recognizable brand in a sector that will continue to grow for some years to come and the winning bid is likely to be closer to $2 billion than to $1 billion.