So Hulu’s for sale -– it has hired investment banks to find a buyer. But what, exactly, would a purchaser receive? The answer could be not much — unless Hulu can cut long-term and preferably exclusive deals for TV shows and movies from its main program suppliers and equity owners News Corp, Disney,
and Comcast’s NBCUniversal. The problem is that those deals will be hard to strike before a sale. That means anyone buying Hulu would need deep pockets to buy new programming –- or to compete with Netflix and possibly other online services for existing entertainment. “Hulu’s real competitors are the cable companies,” says media investor and author Larry Kramer.
A sale would show that the vision that led to the creation of Hulu in 2008 has been a bust. At the time, the broadcast networks wanted a slick destination to offer ad-supported TV shows online. It was their best defense against seeing companies such as Apple and Google move in and dominate online video the way Apple has with online music. But ads haven’t materialized the way initial backers had hoped. Last year, the company created subscription service Hulu Plus. CEO Jason Kilar says more than 1 million customers will sign up for the $8-a-month product by year’s end.
Yet Hulu Plus is an also-ran against Netflix, which has 22.8 million domestic subscribers and is spending a fortune to license TV shows and movies. That’s one reason why it’s been so hard for Hulu’s existing owners to cut long-term deals with the company. They want Netflix’s cash. Disney CEO Bob Iger said last month that “we never believed that Hulu would end up … in an exclusive position as a distributor” for Disney’s entertainment.
Another obstacle to long-term deals: Hulu complicates one of ABC, Fox, and NBC’s most important initiatives. They want cable and satellite operators to pay a license fee to retransmit network programming from local TV stations. Pay TV companies want to know why they should do so when Hulu give viewers opportunities to see their favorite shows without a cable subscription, and sometimes for free. Cable also sees video on demand and its TV Everywhere online initiative as alternatives to Hulu.
The inherent conflicts of interest in Hulu’s ownership structure have also made it hard to cut long-term programming deals. For example, early this year even Fox’s and Disney’s board members couldn’t see the terms Hulu had accepted to get shows from one of their competitors — Viacom. Also, the Justice Department and FCC in January insisted as a condition for Comcast’s acquisition of NBCUniversal that the company offer programs to Hulu on the same terms and conditions as other broadcasters. That raises the possibility that the government might review any programming deals Disney and Fox would strike with Hulu to ensure that Comcast has complied.
Without long-term programming deals, Hulu offers a brand name, a subscription list, an effective video player and an ad sales force. That’s worth something. But it would just be a down-payment on a venture that would require a lot more cash, and luck, just to have a chance to succeed.


“Hulu complicates one of ABC, Fox, and NBC’s most important initiatives. They want cable and satellite operators to pay a license fee to retransmit network programming from local TV stations. Pay TV companies want to know why they should do so when Hulu give viewers opportunities to see their favorite shows without a cable subscription, and sometimes for free.”
That is at the heart of the online distribution issue.
Hulu:
Has established it’s brand. It has subscribers and an ad force that’s been performing poorly. I agree they can continue to grow by either by acquiring content or creating original content. Perhaps, RED BOX will take a look at the Hulu brand. Might make strategic business sense as RedBox moves towards streaming and digital distribtion.
Instead of blowing money on licensing fees & regurgitating syndicated content I can watch anywhere else spend money developing and marketing original programming that’s good…
Hulu has a cool delivery system and the context in which you consume things is pleasing… nice restaurant with lousy food, spend money hiring better cooks in your kitchen. Note to next buyer.
What Bjoel said!
Hulu’s most-viewed movie of all time isn’t one of the studio films, it’s a $100K budget ultra-indie film you’ve probably never heard of. Their top 20 most popular show charts are full of anime series from indies like Viz Media and Funimation. Hulu could lose all of their big studio programs and still retain their visitors if they increase the amount of cool original programming and indies they showcase.
Don’t worry about keeping FAMILY GUY, Hulu. Create your OWN.
Hulu is a great idea, but the content providers put way too many restrictions on the programming to make it work.
Have you ever found a show surfing Netflix on your computer, only to be confronted with a statement that “This content is not available for viewing on your TV or mobile device”? Didn’t think so. If you’re trying to compete with Netflix, you might not want to make such sought-after content as reruns of Happy Endings unavailable for people with TVs and phones.
Moreover, the promise of Hulu Plus was that it was going to make a bunch more episodes available than appear on regular Hulu. In practice, there is very little current content on Plus that is not on regular Hulu, and even less that you can watch on TV, Ipad, etc.
As an example, very few episodes of “Louie” have been available on Hulu at any one time (4-5, I believe) and never have been watchable on TV or mobile devices ever. This week all of season 1 appeared on Netflix and can be viewed on anything that gets Netflix. Meanwhile, two episodes are on Hulu currently. Which service is News Corp encouraging consumers to use?
If Hulu subscribers actually had multi-platform access to the significant swaths of the shows that Hulu has theoretical rights to show, it would be a great service. Instead, the content providers have crippled it with restrictions.
I think Hulu’s strength is in its ability to (re)broadcast episodes from the current season with a subscription model. The back-catalog stuff I agree can – and is – handled better by Netflix. I think the Hulu sweetspot is in delivering near-current content not yet available via Netflix leveraging a subscription-based model rather than a pay-per-episode pay model. If they can keep that going, I think there is still room for them. Oh, and getting rid of the “only available on web” business. That is just lame.
Exactly. Hulu is looking to compete with Netflix but it doesn’t have the resources to do so. However, it does have the resources to compete with pay cable and that’s what they should focus on. Providing the current season from most shows… the episodes that aren’t yet available on DVD and Netflix. Plus, people are always going to pirate content, but is it worth risking downloading something harmful to your computer from some sketchy website when you can watch it legally just by sitting through 3 or 4 commercials?
A lot of smart guys who have made a ton of money (chernin, iger, zukor, and more) in this business bought into this mess. Who will take the fall for such an ill-concieved idea. There’s nobody left to kill. How did these guys let their content out there for the consumer to take advantage of for free. Did they forget what happen to the music business. I don’t often say this but Moonves was right on this one. I’ll never forget being at some seminar or presentation about new media and over hearing a bunch of executives from HULU bemoaning the fact that they could not sell even close to enough advertising to sustain the business model drawn up by the partners. That was two years ago. Once you let any of us get something for free we will never pay for it. Game, set, match.
Hulu is dead. If the content providers don’t want it nobody else will be able to make it viable. Any restrictions placed on an independent hulu would be worse than we see now. The networks who own hulu are making a mistake. Right now it gives them some leverage against Netflix. A sale will strengthen Netflix
Plain and simple they couldn’t figure out a way to make it profitable so they are wanting to sell it. Nobody will buy because what’s the point.
Wouldn’t it be fun if NetFlix bought Hulu…
I knew if I never used it that it would go away. Now I can only hope that happens to NBC.
The one your article mentioned that few people seem to realize is that HULU has the best player out there. it is better than Netflix, HBOGo, MaxGO, EPIX, fancast, etc. They are screwed if they canr get the content issues figured out though
I like Hulu for the not-network tv shows (or since-canceled) shows that I stumble upon. I don’t have cable or satellite (or Netflix for that matter) but if I want to watch an ABC Family show that’s currently on the air, I can just go to the ABC Fam website.
Not that the player/interface isn’t nice – it is – but sometimes the ads are too repetitive.
But it’s been a great place to find webisodes like Dorm Life and The Lake, and shows from other countries like Doc Martin, Sea Patrol, and Stone Undercover.