Yahoo Inc. (YHOO) submitted a bid on Friday to acquire Hulu,
according to a person familiar with the matter, as the Internet
company tries to add more high-quality online video that can appeal
to advertisers.
As of Friday afternoon, seven companies had submitted bids for
Hulu, several of whose interest has been previously reported, the
person familiar with the matter said. They include pay TV operators
DirecTV (DTV) and Time Warner Cable Inc. (TWC); Guggenheim Digital
Media; KKR (KKR); former News Corp. president Peter Chernin's
investment group; and Silver Lake, bidding with William Morris
Endeavor, the person said.
Hulu was founded in 2007 to allow major broadcast networks to
deliver TV programming online. It offers a catalog of more than
70,000 full TV episodes, including the current seasons of hit
shows. The site's owners are Fox-parent News Corp., ABC-parent Walt
Disney Co. and NBC-parent Comcast Corp. (For regulatory reasons,
Comcast can't vote its stake.)
News Corp. also owns Dow Jones & Co., publisher of this
newswire and the Wall Street Journal.
As the owners have invested in other digital video
initiatives--building up their own Web sites, streaming shows to
pay TV subscribers through a strategy called "TV Everywhere," and
licensing some content to other subscription video players like
Netflix Inc. and Amazon Inc.--questions about where Hulu fits in
their broader plans have arisen.
The value of the bids for Hulu isn't clear. The price potential
buyers are willing to pay will depend largely on whether the
broadcasters are willing to continue licensing current seasons of
their TV shows to the site for a long period. The bids submitted
thus far, which are non-binding, will be whittled down in coming
weeks and the parties will negotiate over content licensing, the
person familiar with the matter said. It's possible no sale will
happen. It's also possible one of the bidders could end up taking a
minority stake in Hulu, says a person familiar with the
situation.
The site had $700 million in revenue last year and had over four
million customers for its $7.99-per-month subscription service as
of March 31. Larger rival Netflix had nearly 28 million paid
streaming subscribers in the U.S. at the end of March.
Yahoo's bid comes after the Internet company earlier this week
announced its $1.1 billion acquisition of blogging site Tumblr. In
recent years, multiple leaders of Yahoo have coveted Hulu and
engaged in deal talks with the site, people familiar with the
matter have said. Yahoo withdrew its most serious effort--a bid in
late 2011--because of its own troubles, including a management
shake-up that ended with Yahoo considering whether to sell
itself.
News of Yahoo's bid was first reported by AllThingsD, while KKR
and Silver Lake's bid was first reported by Bloomberg.
For Yahoo, Hulu's attraction is its slate of high-quality
programming, which generates revenue from big brands who advertise
on TV. Yahoo and other Web companies are struggling to produce or
acquire the kind of programming that would encourage advertisers to
spend more of their budgets online.
Yahoo has faced numerous challenges in recent quarters with its
core graphical- and video-ad sales, as it faces increased
competition from Google Inc. and its YouTube video site, Hulu, Walt
Disney Co.'s ESPN.com and social network Facebook, among
others.
In the first quarter of this year, Yahoo's display-ad revenue,
which represents about 40% of the company's sales, dropped 11% to
$455 million from a year ago on declines in the number and prices
of graphical and video ads.
To boost the amount of video content and video-ad space on
Yahoo, the company earlier this year sought to acquire a majority
stake in French video site Dailymotion, but the $200 million deal
fell apart after the French government intervened to halt the
sale.
Christopher S. Stewart and Shalini Ramachandran contributed to
this article.
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