Monday, June 24, 2013

Hulu, Seeking a Buyer, May Shift Course

But the valedictory lap did not last long. Even as the number of views were adding up, so were concerns within the company about the site’s future.

That’s because Hulu, the Web streaming service that is jointly owned by the Walt Disney Company, NBCUniversal, and News Corporation, is up for sale. And each of the potential buyers brings with it a different vision for what Hulu should become.

The interested parties include Time Warner Cable, DirecTV, the Chernin Group — an investment firm owned by the former News Corporation president Peter Chernin — and two private equity firms, Guggenheim Digital Media and Kohlberg Kravis Roberts.

Yahoo, which completed its $1.1 billion acquisition of Tumblr on Thursday, had also expressed interest with an exploratory offer of $600 million to $800 million, according to several people briefed on the sale, who, like several others in this article, spoke on the condition of anonymity because negotiations for the sale were continuing.

The eventual value of Hulu (which would include the brand, its accessible interface and the rights to many of the television shows it offers) is expected to be roughly $1 billion. Binding bids are due by Friday, though one person familiar with the process said the deadline could be delayed until next month.

Web sites change hands all the time, but Hulu’s sale could signal something more fundamental: the end — at least in its current form — of one of the pioneers of online streaming, which in recent years has become an increasingly popular way to view content.

Hulu has a free Web site, with streams of TV episodes supported by ads, and a subscriber-only section, called Hulu Plus,which offers additional episodes at a cost. In 2012, Hulu had $695 million in revenue and the Hulu Plus service had four million paying users, according to the company.

Depending on the buyer, Hulu could be used to foster the further growth of online streaming as an alternative to the cable TV bundle. Or the site could be kept under lock and key, exclusively for the use of cable subscribers.

Time Warner Cable, for instance, would like to use Hulu to create an industrywide “TV Everywhere” hub in which subscribers could have access to network and cable shows on-demand. A distributor like DirecTV could use Hulu — both its brand name and its technology — to sell a new service that streams a bundle of television channels to subscribers over the Internet. Intel is trying to create a similar type of service; if it succeeds, then traditional distributors may feel the need to sell something similar.

For cable or satellite distributors, Hulu is also a prize for an existential reason: as an executive at one distributor put it, “It’ll make us look like we’re ready for the future.”

But that option concerns some Hulu employees who are fond of the company’s quirky Silicon Valley-meets-Hollywood culture. They see the site as an innovative service that untethers shows from the television, not as another piece of a costly cable bill.

“Can Hulu remain Hulu if a cable company buys it?” asked one person close to the company.

Several Hulu executives have already left the company, amid worries about the future, and it is possible there could be an exodus of creative and engineering employees if a cable operator wins the auction and the site loses its start-up identity.

Jason Kilar, the founding chief executive of Hulu, left in March and was temporarily replaced by Andy Forssell, the senior vice president for content and now the acting chief executive. Richard Tom, the former chief technology officer at Hulu, left after Mr. Kilar, as did Johannes Larcher, the former senior vice president for international operations. Later this summer, Pete Distad, Hulu’s senior vice president for marketing and distribution, also plans to depart. A spokeswoman for Hulu declined to comment.

Mr. Chernin has the most personal connection to Hulu, as he championed the start-up from its inception when he was still at News Corporation. This year, Mr. Chernin reportedly bid about $500 million for the company. The Chernin Group receives financial backing from Providence Equity Partners, which until October owned a 10 percent stake in Hulu. (Providence is not directly involved in the bid.)

Now, AT&T is in talks to join the Chernin Group in a bid for Hulu, a pairing that would give Mr. Chernin’s media, technology and entertainment investment group the financial heft to go up against major corporations. (The technology Web site AllThingsD first reported on the partnership. An AT&T spokesman declined to comment.)

For AT&T, Hulu could present the opportunity to expand its “U-verse Screen Pack,” a $5-a-month option that lets U-verse TV subscribers stream videos.

Michael J. de la Merced contributed reporting.

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