Late Monday afternoon, some reports were circulating that Hulu LLC is being floated around as a possible auction target. The co-owners, News Corp (NASDAQ:NWS) and The Walt Disney Company (NYSE:DIS) have been pulling Hulu on a string the last couple years in terms of whether to keep or sell, and now Reuters is reporting that the board of directors at Hulu has actively contacted potential buyers to gauge their interest. Hulu does not confirm the report, which cites three unnamed sources.
There is also no information as to what companies have been contacted, but it has been known in the past that Yahoo! Inc. (NASDAQ:YHOO) and Amazon.com Inc. (NASDAQ:AMZN) have both been interested in acquiring the video-streaming service. Before the board actively searched out suitors, there were reports that the board had received overtures from a couple potential buyers, but Hulu LLC has not received any formal offers. The latest talk is apparently part of a regular strategic review for the company, as the two co-owners have been on divergent paths in terms of the direction to take the company.
On the one hand, The Walt Disney Company (NYSE:DIS) likes the idea of offering Hulu as a free service that is supported by advertising, while News Corp (NASDAQ:NWS) likes the Hulu Plus model, which is an ad-free monthly subscription service. Overall, Hulu reportedly has 3 million subscribers and posted revenue of about $700 million last year.
If The Walt Disney Company (NYSE:DIS) and News Corp (NASDAQ:NWS) cannot secure a buyer and the two sides agree on selling the company, the option that has floated around is to have one company buy out the other’s stake. There is no indication yet whether that is a legitimate option by either side. However, Wedbush Securities analyst Michael Pachter said he’s skeptical whether a legitimate buyer will step up, considering some problematic situations in the business model.
“Nobody will buy them unless they can fix content costs in a long-term agreement,” Pachter said. “The value is based on the profit potential and without certainty about costs no rational bidder will step up.”
What do you think about this development? What are your thoughts about Hulu LLC, and is there a company out there that should buy it, and do you think it will if given the opportunity? Let us know your thoughts in the comments section below.
DISCLOSURE: I own no positions in any stock mentioned.
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