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Summary:

Bernstein Research wonders if the decision by Providence Equity Partners to pull its minority stake out of Hulu is a signal that the entertainment conglomerates who own most of the streaming service — and who wish to uphold TV’s multichannel model — don’t want it to grow.

Hulu-slow-down

Is the decision by Providence Equity Partners to pull its 10 percent stake out of Hulu a signal that the media conglomerates who own the most of the streaming service wish to curtail is growth?

That’s the hypothesis of a Bernstein Research report released Friday. Led by senior analyst Todd Juenger, Bernstein said that Providence Equity’s retreat “only underscores our suspicion that the controlling shareholders are increasingly motivated to cut off Hulu’s growth.”

This follows a report Bernstein issued two weeks ago, in which it questioned the longterm commitment of the Walt Disney Company, News Corp. and Comcast/NBC Universal to Hulu, given their strong desire to uphold the traditional multi-channel TV model

How can these companies support the growth of an over-the-top content business, Bernstein wondered, when they’re vested in models like TV Everywhere in which consumers can’t watch video unless they have a cable, satellite or telco TV subscription?

NBCUniversal no longer has board seats to control Hulu following its acquisition by Comcast. However, Bernstein speculates that the decision by Providence Equity to pull out an investment valued at around $200 million may signal that Disney and News Corp. are seeking to gain greater control of Hulu.

Neither Hulu or Providence have commented regarding the transaction.

So if Hulu represents a strategic conflict, whey didn’t the conglomerates sell it last year when they had the chance?

“I think the fact that Hulu’s parents are concerned about the strategic conflict Hulu presents for them is exactly why they didn’t sell the asset last year,” Juenger told paidContent. “In somebody else’s hands, Hulu could pursue a direction that would be arguably harmful to the networks.

“With Hulu now completely in their control, they can take whatever direction for Hulu they believe best serves their comprehensive long-term interest, which in our view likely includes decreasing the role Hulu plays in on-demand availability of in-season broadcast content relative to TV Everywhere or enhanced ad-supported VOD services provided by the MVPDs,” he added. “This better positions the networks to argue for higher and higher affiliate fees, while allowing them to continue receiving ad revenue and, eventually, even C3 audience credit for the audience.”

  1. Stock Fisher Friday, April 27, 2012

    So, an equity group pulls interest in Hulu and it underscores media conglomerates want to curtail Hulu’s growth? And they want to control Hulu so it isn’t grown in a direction that is harmful to the networks. Ummmmmmm, go rent Conspiracy Theory and throw a Mel Gibson party.

    How about the simple fact that streaming is the wave of the future, and media conglomerates have better embrace each and every technology that will reach out to their markets. If an equity group makes a business decision to dump an asset because it no longer fits their portfolio management philosophies and/or return exptations, it doesn’t necessitate hair brained theories from ‘research experts’. And media comglomerates with significant holdings in Hulu *should* hold an interest in controlling streaming technology, or they’ll face the dismal financial future of losing their audiences. Don’t count on Hulu cutting VOD either. Perhaps the cost for service structure changes, but cutting it gives away viewership to competiton (Go look at a company called Amazon). Is this the same anaylst that gave Time Warner an under-perform rating in Feb? Free analyst advice is so often worth exactly the price. This article is a perfect example.

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  2. Sounds like a whole lot of energy focused on a meaningless theory. Providence was a moderator between other Hulu investors…and why Berstein analysts can’t follow why Providence invested in Hulu in the first place and where the money will now be invested is beyond me. Here’s a hint…look for a guy named Peter. Hopefully that isn’t too much of a strain on the Berstein brains. The fact then remains the current Hulu investors are not likely to get along. They couldn’t agree to intentionally curtail Hulu growth because they can’t agree on anything. The research on Hulu should more correctly state what is obvious: Providence is redirecting investment money, and Hulu current ownership will falter if they can’t focus on common goals. Kick the ridiclous Berstein theory out. And focus on what is meaningful to investors. If Hulu remaining investors can’t get along, follow the next big name in streaming, because their bickering will cost them viewership when competitors will be more than willing to take it away.

    Common Sense 1
    Berstein Theory 0

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