Blog Post

Disney Programming Deal With Hulu Would Transfer In Sale

A new agreement between Disney (NYSE: DIS) and online video joint venture Hulu includes transfer rights to a new owner, paidContent has learned. Put another way, according to a source familiar with the situation, the rights stay with Hulu for the length of the contract regardless of who owns it. That goes part of the way to resolving one of the most important questions as the portal and its owners, which include News Corp (NSDQ: NWS). NBC Universal (NSDQ: CMCSA) and Providence Equity Ventures, explore a possible sale: what happens to the major network programming rights that lay the foundation for Hulu’s value?

As for News Corp., which also has a new handshake deal with Hulu, it is highly unlikely that Disney has agreed to a deal that differs — and if the equity partners are serious about a sale, this is one area where they would all have to be on the same page. NBC Universal cannot be involved in sales or operations discussions (one of the regulatory conditions for Comcast gaining control of the network earlier this year). (More on Hulu’s history can be seen on our timeline.)

The handshake deals with Fox and Disney include increased ad positions, something CEO Jason Kilar has opposed on the record but may have been one of the trade offs needed to retain the programming at all for Hulu — and lock it in for enough time to be meaningful to a buyer or, should it be resurrected, an IPO. Other than that, my understanding is the Disney deal remains fairly similar in terms of programming availability and exclusivity. The exact length of the new agreements is unclear as is the way exclusivity would be handled and extensions would be framed.

Hulu has other assets, including revenues projected to hit $500 million this year, its well-regarded user experience and technology, rankings at or near the top in key online video categories, a subscription business that pales next to Netflix (NSDQ: NFLX) in numbers but has access to video the larger subscription service can’t get, and a strong brand. But the foundation for all of that is the programming commitment NBC Universal and Fox brought to the original joint venture deal in late 2006, pledging next-day access to prime-time network programming in most cases and to mirror access to video on their own sites. They extended those rights when Disney joined as an equity partner in 2009.

Despite other programming deals, including one with Viacom (NYSE: VIA) that covers The Late Show with Jon Stewart and The Colbert Report, among others, without the equity partners locked in, Hulu would be a whiter shade of pale.

Bloomberg reported earlier today that Disney and Hulu had reached a tentative new agreement that includes more ad positions.