Blog Post

Disney, Fox Commit To Hulu; Halt Sale Talks

Unable either to attract the kind of money under circumstances that would make it worthwhile or a deal that made more strategic sense than holding on, Hulu’s owners have decided to stand pat. Instead, Disney (NYSE: DIS), News Corp. (NSDQ: NWS), investor Providence Equity and senior management headed by CEO Jason Kilar promise to focus on fulfilling Hulu’s potential instead of selling it. (Comcast (NSDQ: CMCSA) acquired NBCU’s stake but can’t take part in running the online video portal as a condition of the merger.)

Here’s the carefully worded statement they released late Thursday afternoon:

“Since Hulu holds a unique and compelling strategic value to each of its owners, we have terminated the sale process and look forward to working together to continue mapping out its path to even greater success. Our focus now rests solely on ensuring that our efforts as owners contribute in a meaningful way to the exciting future that lies ahead for Hulu.”

A source familiar with the situation claimed that it wasn’t about the money, saying the bids were within the realm. Nice try but you can’t drop money out of this equation. You also can’t remove control, potential or the fear of picking the wrong distributor to imbue with primetime superpowers for a few years.

On the bidding side, buying Hulu meant big bucks for a short-term shot and the possibility that a new owner might get enough out of it to make $2 billion or so worth before having either to pay again for those programming rights or do without. Dish, Amazon (NSDQ: AMZN) and Yahoo (NSDQ: YHOO) were serious enough to start the process for the second round of bids; Yahoo, sans permanent CEO and in its own potential sales process, dropped out.

Google (NSDQ: GOOG) waved around the possibility of big bucks — as much as $4 billion — with conditions attached. (I was told Google never made a formal bid but it may depend on your definition of formal.) Of the four, Yahoo probably was the safest bet in terms of what could be done with the rights. Satellite operator Dish would freak out the cable operations, Amazon is a key component of the entertainment marketplace already and creating a video alternative that also could upset other distributors.

The sale was never a foregone conclusion. Instead it was a post-experimental strategic exercise that was more likely to end this way as it was to end in a sale. The Hulu owners contributing content have major decisions to make about the way they manage that content in a more competitive digital environment. Some of those decisions would have to be made with a sale — no one wanted to bid billions without a long-term programming commitment. But that meant deciding where to sell, if the money was good enough, also was a vote to give one distributor a lot of power at a particularly pivotal time.

More to come.