Core business has not seen growth for years. Armed with a lot of cash, the company is on the look out for new sources of revenue growth. Rising video streaming company, Hulu, LLC fits the bill perfectly as Yahoo! Inc. (NASDAQ:YHOO)! seeks to ramp up its revenue from video ads. After the failure to buyout the French video site, Dailymotion, the company should go after Hulu, as its owners are in strategic discussions about the future.
Hulu’s business model, which includes a mix of subscription revenue from users as well as advertising revenue from basic video offerings, would be a big plus for Yahoo! Inc. (NASDAQ:YHOO), as it seeks to keep up with Google Inc (NASDAQ:GOOG)’s YouTube and also have a strong presence in the trend towards “over-the-top” video consumption.
Hulu’s owners and management are not in harmony, as the company’s co-founder left the company. Hulu is owned by The Walt Disney Company (NYSE:DIS), Comcast Corporation (NASDAQ:CMCSA) and News Corp (NASDAQ:NWSA). Comcast Corporation (NASDAQ:CMCSA)’s NBC remains a silent partner, whereas, News Corp (NASDAQ:NWSA). and Disney are still evaluating the company’s forward strategy and how to monetize this rapidly growing asset. And the two media giants are trying to figure out whether to keep Hulu as an ad-supported business model or purely run on subscriptions.
The Walt Disney Company (NYSE:DIS)’s ABC unit owns 32% of Hulu, and accounts for its investment as an equity-method investment, but will likely consider buying out its other partners and convert the asset into a subsidiary. ABC already provides a wide range of shows on Hulu’s site on the next day, and complete ownership will aid Disney’s massive entertainment portfolio to be even stronger.
In addition, market speculation is high with numerous sources stating that other leading companies like Amazon.com, Inc. (NASDAQ:AMZN) and Time Warner Inc (NYSE:TWX) also considering potential bids on Hulu. Also, Google previously wanted to acquire Hulu as well. Yahoo! Inc. (NASDAQ:YHOO) can acquire Hulu and keep the rapidly growing asset away from competitors, while simultaneously growing its revenue base from the current levels
Hulu has been growing its paid subscriber base rapidly. The company added ~1 million subscribers in Q1 2013, and now has more than 4 million subscribers for the ad-supported premium service, Hulu Plus. The company doubled its sub base in 2012, and ended the previous year with a little over 3 million subs. While Hulu still trails the Internet streaming giant, Netflix, Inc. (NASDAQ:NFLX), the company is making strides towards reaching Netflix, Inc. (NASDAQ:NFLX)’s global subscriber base of more than 36 million.