Friday, August 12, 2011

How Much Is Hulu Worth?

Lots of news these days of consumers dropping their cable and satellite services for an internet only connection to the home. And that cord cutting is affecting license fee revenue to networks. Some of those same networks, NBC, Fox, and Disney, today also own a piece of Hulu, a web platform for streaming TV shows and movies. And now Hulu's investors are waiting their big pay day as they put their platform up for sale and "are expecting bids of at least $1.5 billion for the site and its licenses."

But perhaps because of cord cutting, these same content companies might want to retain a piece of the web platform for future revenue growth. "It’s possible, for instance, that some of Hulu’s owners could hang on to their stakes, which could push the purchase price down. Alternately, a buyer could ask the company’s network owners to increase the length of Hulu’s exclusive online license, and end up paying even more for those rights." For buyers, the length of the existing deals and future deals will determine the value of Hulu. Without enough meaningful content and some agreement to offer exclusivity of content for a period of time, it's valuation may not be as high as possible. Web users have an insatiable appetite for video consumption, and Hulu's content partners may need to go even deeper into their libraries to satisfy the consumer demand.

The list of buyers that may be interested include Apple, Google, Yahoo, and Amazon. For each, the question remains, can they negotiate better license fee deals for content rather than buy through Hulu? Is the Hulu platform better than what they are each currently using? Is the Hulu value justified over a period of time? And will Hulu's premium subscription continue to find future growth? As the financial wizards sharpen their pencils, the strategic thinkers need to envision how the Hulu platform can benefit their business plans.