Better fits
Two other rumored bidders would be solid fits. Time Warner Cable Inc (NYSE:TWC) and DIRECTV (NASDAQ:DTV) both live within the same media world as Hulu. And each company is a distribution partner to the content companies that own Hulu, like Disney. So there wouldn’t be any need to change how Hulu is run, advertising and program delays and all.
Satellite access
DIRECTV (NASDAQ:DTV) would likely see the bigger benefit from Hulu. The company is the largest satellite television provider in the United States and has notable operations in Latin America. Buying Hulu would give it a well established brand on the internet through which it could grow its customer base. More importantly, it would allow it to attract customers that would never even consider a satellite deal — like cable customers.
DirecTV’s top line has been growing solidly for a decade. Since the end of the 2007 to 2009 recession, earnings have gone from just under a dollar a share to over $4 last year. It has a notable debt load, but could easily handle a Hulu deal. If DIRECTV (NASDAQ:DTV) wins the bidding war, growth investors should be pleased.
Cable deal
The ability to take over a substantial video subscription site would also be a boon to Time Warner Cable Inc (NYSE:TWC). It would allow the giant cable company to draw customers in areas that it doesn’t serve. The physical limitations of cable are the biggest obstacle to adding new customers. Hulu’s web-based service wouldn’t face that challenge. The risk, however, is creating an arms race on the web between cable companies.
Time Warner Cable Inc (NYSE:TWC)’s top line has been heading higher and earnings have more than doubled over the last three years to nearly $7 a share. The shares have been on a steady climb since the end of the recession. Without a Hulu-like deal, however, investors should focus on the company’s customer growth. Any weakness could lead investors to sour on the company’s prospects. A Hulu deal, however, could be an important catalyst to even higher share prices.
The right fit
As with any acquisition, finding the right fit is important. Yahoo! Inc. (NASDAQ:YHOO) understandably wants to be in video, but Hulu would be a hard purchase to integrate. DIRECTV (NASDAQ:DTV) and Time Warner Cable, however, could both make a deal work relatively easily. And either one would likely see an uptick in customer growth as a result.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends DirecTV.
The article Finding the Right Fit for Hulu originally appeared on Fool.com.
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