On Friday, 21st Century Fox, NBCUniversal and The Walt Disney Co. jointly announced that they will maintain their respective ownership positions in Hulu and together provide a cash infusion of $750 million “to propel future growth.”
While the move indicates Hulu’s owners didn’t like the final offers on the table, which they received last Friday, company insiders said the decision was more about settling on the right strategy for “the future of where our content was going to live” and noted that keeping Hulu was always one of the outcomes under consideration.
DirecTV, a combo bid from AT&T and Chernin Group, and Time Warner Cable had been the last three contenders. Hulu’s owners were originally hoping to bring in $2 billion for the company, but bids had come in at less than $1 billion. It’s not known what the final offers from DirecTV, AT&T-Chernin and TWC (which was seeking a partial ownership stake) were.
According to Disney and 21st Century Fox execs, they came to the conclusion to keep Hulu in the fold not because the bids were too low but rather because they feel it has the potential to become an even bigger player in subscription VOD and take on Netflix and others.
Disney chairman and CEO Bob Iger told reporters at the Allen & Co. conference in Sun Valley, Idaho, on Friday that the decision was not the result of evaluating the bids, calling them “good, solid offers.”
“The future of Hulu is bright, and if the future of Hulu is bright then we should hold on to it,” he told reporters.
In a prepared statement, Iger said, “Hulu has emerged as one of the most consumer-friendly, technologically innovative viewing platforms in the digital era. As its evolution continues, Disney and its partners are committing resources to enable Hulu to achieve its maximum potential.”
Chase Carey, prexy and COO of 21st Century Fox, commented, “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.”
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News Corp. and NBC launched Hulu in 2008, as a response to the rise of YouTube and other online-video sites. The media companies were looking for a way to aggregate premium TV content in a way they could control and monetize. Disney came on board in 2009.
In 2011, Hulu’s parents had looked to unload their joint venture, but similarly called that off after engaging in discussions with interested buyers reported to have included Google, Yahoo, Dish Network and Amazon.
Hulu now has more than 400 content partners and boasts more than 30 million monthly unique visitors, according to the company. In 2010, it launched Hulu Plus, an $8-per-month service that provides additional content not available on the free site, including past seasons of many TV series. Hulu Plus, which has more than 4 million subscribers, also provides access across multiple Internet-connected devices, including TVs and tablets.
DirectTV and Chernin with AT&T had been viewed as front-runners, but sources close to the Hulu talks had cautioned that 21st Century Fox, NBCU and Disney were just as close to pulling Hulu off the market as completing a sale. While a higher bid may have compelled the owners to proceed with a sale, the potential buyers had complained that content rights restrictions Hulu’s parents were asking reduced the site’s value.
While Hulu’s ownership picture is clear, there are still a myriad of questions surrounding its future strategic direction. Will the streaming service continue its hybrid model of free ad-supported and monthly subscription fees? Disney and 21st Century Fox (which has split off from News Corp) have had different opinions on the matter, and it’s not clear whether their keeping Hulu means there’s a final resolution on that front.
Meanwhile, it’s an open question as to whether their holding on to Hulu would preclude another investor coming in and joining them. Time Warner Cable was mentioned during the bidding process as potentially interested in taking a stake, as Providence Equity Group once did before bailing as a fourth partner once it turned a profit
Since the second round of Hulu negotiations got underway earlier this year, Hulu has seen the departure of many high-level execs including CEO Jason Kilar, who had clashed with the company’s owners over strategy. He was replaced on an interim basis by senior veep of content Andy Forssell; Hulu’s owners are not currently searching for a new CEO but may revisit management plans.
News of Hulu’s aborted sale was almost a non-story for insiders milling about Sun Valley confab Friday morning. Days of chatter at the event about how valuable a market had been created by rival service Netflix may may have tipped the balance for execs at the congloms who were weighing the decision, according to a source familiar with the talks.
(Andrew Wallenstein and Rachel Abrams contributed to this report.)