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Updated: The Walt Disney (NYSE: DIS) Company could wind up with an equity stake in Hulu in exchange for adding ABC programming to the NBC Un…

imageUpdated: The Walt Disney (NYSE: DIS) Company could wind up with an equity stake in Hulu in exchange for adding ABC programming to the NBC Universal-News Corp (NYSE: NWS) joint venture, a source familiar with the situation tells paidContent. It’s not clear how much of Disney’s television programming is involved beyond ABC — a second source says all Disney content has been discussed but it centers on ABC; other possibilities could include ESPN (not likely given ESPN’s reliance on license fees from cable operators and others) and, if not the Disney Channel, some offshoots. The discussions, dormant for a while, have picked up again recently and are described as “serious” by both sources. A third source close to the situation said the discussions with Disney are “definitely real” — and more so than before — but cautioned against saying any deal has been reached.

Providence Equity Partners owns 10 percent of the joint venture in exchange for an early $100 million investment; NBC Universal (NYSE: GE) and News Corp each own 45 percent. One plan, according to one source, is for Disney to get something close to parity with the media companies, possibly with performance incentives. But it is difficult to see NBCU and News Corp agreeing to parity — a healthy stake, yes, but the others are likely to want their first-in status to equal larger shares than those coming in now.

The deal sounds similar to variations I was told were discussed with CBS (NYSE: CBS). Instead, Hulu wound up yanking its programming off CBS Interactive’s TV.com, which signed a distribution deal before parent CNET was acquired by CBS, over contractual issues. The result: gaping holes in the programming for Hulu and TV.com. Disney has stayed away, though, focusing primarily on delivering its broadband programming through its own players on its own sites.

But would serious equity be enough or would Disney insist that NBCU and News Corp. extend their commitments to Hulu for NBC, Fox and various cable nets beyond the remaining year? The exclusivity makes Hulu the only conduit for PC-based distribution; as is the case with NBC and Fox, ABC still would be able to distribute its content through its own players on its own sites. That kind of assurance from NBCU and News Corp. would seem even more important given a variety of issues, including the pending departure of Hulu board member Peter Chernin, who played a key role in making the JV happen as COO of News Corp., and the pressure from cable operators like *Comcast* (a Hulu distribution partner through its Fancast portal) to fold in online access to broadcast and cable programming with cable subscriptions. Disney also could agree to a non-exclusive deal, which means it would keep the rights to co-distribute its content — but that would put a significant equity stake in doubt.

I was told some outsiders are reading too much in to the idea of parity. On the notion of commitment, that source told me: “In terms of commitments, I would think all the parties would want to be equal in terms of what their commitments are.” That would include the amount of content, scope of involvement and the integration within each organization.

Why now? One source says, “Hulu has more scale (than the networks), which is why I think they’re back at the table.” Hulu.com recently celebrated the first anniversary of leaving beta and is in the midst of a national branding campaign that started during the Super Bowl with an ad featuring 30 Rock‘s Alec Baldwin. Stats released this week by comScore (NSDQ: SCOR) Video Metrix showed Hulu with a 33 percent increase in viewed videos following the ad. Hulu delivered 333 million videos in February, ranking fourth in U.S. video properties with 2.5 percent. Hulu’s share is small compared to YouTube but not compared to the standalone networks. In the same comScore report for February, Viacom (NYSE: VIA) Digital Network accounted for 1.9 percent of videos delivered, with Disney Online and CBS Interactive each just under 1 percent.

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  1. I'd love to see this happen. I have been having problems with the video player that ABC has on it's website for more than six months, and have completely given up trying to figure out how to get the tool to work! Putting shows on the non-hassle Hulu is a much better idea, in my mind, than having a faulty program that freezes and crashes browsers when viewers are trying to catch up on shows they may have missed when they first aired.

  2. This is vertical integration and a violation of the Sherman anti-trust laws. See the 1948 precedent set by United States vs. Paramount.

  3. hello I thought you might be interested in this article

    Of course you probably already know about this

    Doug

  4. It's partially about centralizing content. However, the big loss of ABC and CWTV is that they use that Move Player. This makes ABC and CWTV content unplayable on all of the Linux systems. From the looks of it, all they did on Veoh was add a link back to their website with the same player. Hulu secures the content, but makes use of Flash; Hulu's Flash based player works just fine on Linux systems. Flash is an acceptable standard that works on Linux, Mac, Windows and Solaris and with Firefox, Opera, Safari and Internet Explorer. We're really talking about development/content 101 principles; stick with the standards when possible. Disney channel content would be a great bonus.

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