The three companies that mutually own Hulu — 21st Century Fox, the Walt Disney Company and NBCUniversal — said Friday that instead of selling the pioneering streaming video Web site, they would make a new investment of $750 million and use Hulu’s technology to compete against other online distributors like Netflix. The announcement represented an anticlimactic end to months of sale speculation and disappointed bidders like DirecTV, that were prepared to pay about $1 billion for the site.
The Web site’s owners concluded, according to a person with close ties to the negotiation process, that the “equity value in the long run outstrips the sale value.”
“The future of Hulu is bright, and if the future of Hulu is bright, then we should hold onto it,” Robert A. Iger, the chief executive of Disney, told reporters at the Allen Company media and technology conference in Sun Valley, Idaho. Mr. Iger said that the decision had nothing to do with the bids for the video service, calling them “good, solid offers.”
Speculation about the fate of Hulu has hung over the conference, an annual gathering of top media and technology companies normally known for the deals that emerge from lunches and quiet meetings held at the mountain resort. Mr. Iger had been seen huddling with Chase Carey, the president of 21st Century Fox, during the conference.
Mr. Carey checked out of the resort shortly before the Hulu decision was made public. But the company’s chief executive, Rupert Murdoch, was still there, and he told reporters afterward that he was “very pleased.”
The decision to stick together was made, he said, after getting Hulu’s operators — meaning Fox and Disney — on “the same page.” Seemingly casting some blame in Disney’s direction, Mr. Murdoch added, “I was always on that page.”
The companies have clashed repeatedly over Hulu for years; meanwhile, the third owner, NBCUniversal, has been a silent partner since being acquired by Comcast in early 2011. (At that time the government barred Comcast from being involved in Hulu’s business affairs, for fear that it would try to impose restrictions on Hulu to protect its core cable business.)
Hulu’s board explored a sale once before, after receiving an unsolicited bid in mid-2011, but decided to call off that sale a few months later.
For 21st Century Fox and Disney, holding onto Hulu keeps them intimately involved in the future of streaming video, a field dominated by Netflix and Amazon. The companies had little to say on Friday about how their decision to keep the site will affect the site’s tens of millions of monthly users. Currently, Hulu has a free Web site, with streams of TV episodes supported by advertisements, and a subscriber-only part of the site, called Hulu Plus, with a greater number of episodes.
While the free site is not going anywhere anytime soon, the companies might further emphasize Hulu Plus, according to people at the companies who spoke on the condition of anonymity while discussing confidential conversations. Its owners have visibly started moving down that path by placing limits on the number of shows that are streamed free the day after they are shown on television.
What the companies are almost certain to do, these employees said, is seek to turn Hulu into an industrywide “TV Everywhere” service. “TV Everywhere,” the concept that cable and satellite subscribers should be able to stream shows and channels whenever and wherever they want, has been talked about for years as a way to retain subscribers — and counter the threat from Netflix — but programmers like Fox, and distributors like DirecTV, have struggled to make it a reality.
The owners believe Hulu could help by becoming a hub for “TV Everywhere,” perhaps by adopting a login system that verifies cable and satellite subscribers’ identities and then serves up programming for them. This would be bad news for households that use the site to avoid paying for cable, but potentially good news for the people who do pay, because it would provide broader on-demand access to the hundreds of television shows that are hard to find online now.
Hulu will also continue to increase the number of original shows that it commissions, in a strategy similar to that of Netflix, which has gained attention for expensive shows like “House of Cards.” Skepticism abounded on Friday about how competitive Hulu can really be, given Netflix and Amazon’s deep pockets. But much of the $750 million infusion of cash announced by Hulu’s owners on Friday will be spent on program acquisition and program development, according to people at the companies. The money will also be spent on marketing and technology.
Some participants at the Allen Company conference this week questioned whether Disney and Fox ever truly intended to sell Hulu, and instead used the sales process to establish a value for the video service.
DirecTV, believed by some to have been the front-runner in the bidding this summer, declined to comment on the owners’ decision not to sell. So did Time Warner Cable, which had proposed that it become a minority owner of the site alongside the other owners. Bloomberg reported late Friday that the cable company remained in talks with the owners about acquiring a stake, and said that a deal could be reached by the end of July.
Michael J. de la Merced contributed reporting.
Article source: http://www.nytimes.com/2013/07/13/business/media/owners-of-hulu-call-off-sale-and-plan-to-invest-750-million.html?partner=rss&emc=rss
