Google may be poised to bid for Hulu
Google Inc., which already rules the Web with the world’s most popular search engine and video site, appears poised to take an even deeper plunge into Hollywood with a potential bid for rival online video pioneer Hulu, people familiar with the discussions said.
The bold push into the entertainment sphere signals Google’s growing ambitions to snap up more mainstream programming that would entice online viewers — and those in the living room — to watch longer, while capturing an even bigger advertising payload from major brands.
Google’s YouTube is already planning to position itself to compete for viewing time with broadcasters and cable operators by launching television-like channels with professionally produced original content and user-created video.
Buying Hulu, which is owned by Walt Disney Co., News Corp. and Comcast Corp.'s NBCUniversal, would deliver top-rated TV shows such as “Glee” and “Modern Family” and the major advertisers that pay top dollar to promote them.
But such a purchase probably would also draw heightened scrutiny from federal antitrust regulators. The Federal Trade Commission recently launched an antitrust inquiry into the Internet search giant’s business practices.
Google is one of a dozen companies kicking Hulu’s tires, said people familiar with the situation who spoke on the condition of anonymity because talks are confidential. Google’s recently hired financial advisors, Morgan Stanley and Guggenheim Partners, set up the meetings with media, technology and communications companies.
Hulu began presenting its financial information to potential suitors this week after an unsolicited expression of interest prompted the board to consider a sale.
Technology heavyweights including Microsoft Corp. are evaluating whether Hulu would further their efforts to capitalize on the popularity of online video and reach the growing number of viewers who watch TV shows, movies and short videos on computers, mobile devices and Internet-connected TV sets. It’s too early to say if there is a front-runner among potential suitors, the people with knowledge said.
A Google spokeswoman said the company does not comment on rumor or speculation. Representatives from Hulu, Microsoft and Yahoo Inc. also declined to comment.
Google is the most intriguing of the prospective bidders because of its complicated — and often testy — relationship with Hollywood. Last year’s launch of Google TV, which streams Web content onto television sets, flopped because the major broadcast networks blocked access to streams of their popular shows.
The Internet powerhouse has hired Hollywood veterans to make inroads. This spring, YouTube secured a movie rental deal with Sony Pictures, Warner Bros. and Universal Studios.
But rivals Walt Disney Studios, 20th Century Fox and Paramount Pictures have held back, amid concerns that Google has failed to do enough to combat Internet piracy. Paramount owner Viacom Inc. is still embroiled in a copyright infringement lawsuit against Google’s YouTube.
Hulu presents an opportunity for Google to get access to programming and prove to Hollywood that it can help, not harm, broadcasters, said Forrester Research analyst James McQuivey.
“For Google to be able to buy the access that Hulu has to that content would give Google the opportunity to build an audience and show programmers that they know how to deliver content in ways programmers might ultimately be happy with without having to do a single negotiation,” McQuivey said.
Hulu’s licensing deals for top-rated TV shows quickly vaulted the 3-year-old service to among the top online video destinations, with some 28 million monthly viewers, according to measurement firm ComScore. Two of the media companies behind the online video service, Disney and News Corp.'s Fox network, recently renewed licensing agreements to make Hulu more attractive for a sale.
Comcast agreed to give up NBCUniversal’s management control in Hulu to get approval for its recent acquisition of a majority stake in the media conglomerate. Comcast is required to provide programming to Hulu on the same terms as the other owners.
But the new agreements may include provisions that would require users to prove they’re paying for cable or satellite TV service before they can watch episodes of shows one day after their initial airing. Otherwise, they would be forced to wait eight days. The deals would remain intact if Hulu is sold.
Janney Capital Markets analyst Tony Wible said he expects Hulu’s owners to seek the same valuation for Hulu that Netflix commands from investors, about $2 billion. Hulu earlier scrapped an initial public offering that some investment bankers said could have valued the company at more than $2 billion.
Technology companies may be willing to pay such a hefty price tag to get the kind of original content that draws advertising from major brands, said Andy Hargreaves, a Pacific Crest Securities analyst.
But Arash Amel, research director for digital media for IHS Screen Digest, said he isn’t sure how much of a premium. Google, Microsoft and Yahoo would risk paying through the nose for shows when content deals expire, he said.
“If you had those deals for 10 years, OK, you have time to build a business,” Amel said. “But look at what [Hollywood studios] are trying to do to Netflix. They help you until you are successful, then they want most of what you make or they try to kill you.”
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