Why Hulu’s Owners Couldn’t Find A Buyer(techcrunch.com)
techcrunch.com
Why Hulu’s Owners Couldn’t Find A Buyer
http://techcrunch.com/2011/10/13/why-hulus-owners-couldnt-find-a-buyer/
5 comments
I think the idea was that none of the Hulu partners felt a real need to keep Hulu around. The Netflix threat has been thwarted. Enough providers have turned against Netflix it can't stand on its own anymore. Everyone with content is instead building its own segregated streaming service around proprietary content.
So what do you do with a very popular but strategically dead product? Sell high is what you do. At least that's what Comcast and Disney wanted to do with Hulu. New Corp's streaming offering isn't quite as mature, so it was fine keeping Hulu for a little bit longer.
The same thing happened with Netflix. What do you do with a popular but strategically dead product like the DVD rentals? Sell high, sell high.
Netfix's DVD business is worth something. Hulu is worth something. They were just hoping it was worth more.
So what do you do with a very popular but strategically dead product? Sell high is what you do. At least that's what Comcast and Disney wanted to do with Hulu. New Corp's streaming offering isn't quite as mature, so it was fine keeping Hulu for a little bit longer.
The same thing happened with Netflix. What do you do with a popular but strategically dead product like the DVD rentals? Sell high, sell high.
Netfix's DVD business is worth something. Hulu is worth something. They were just hoping it was worth more.
If I were Google, I would have done it. Offered $2B and taken the 2-year deal with Hulu. Match it up with YouTube, grow it as big as possible, and completely dominate online video to the point of creating a monopoly. At that point, you'd have leverage to negotiate with the studios -- yes they have the content, but you'd have the distribution (think iTunes and record labels). If they don't deal with you and try to launch something separate, they'd have no traffic. And there'd be no real competition on bidding from third parties as they'd likely already have been wiped out by the YouTube/Hulu combo.
I keep being reminded of the cliched statement: content is king.
The next revolution in the media industry will be brought about by the ability to produce high quality, low budget content.
Things like the RED camera, HD video capable SLRs, point and click video editing software, easy access to compute farms are pointing to a future where video content will be as easy to produce as back in the 2000's where anyone could just put up a webpage with the tags <html></html>.
You can already see it happening and that is what has the old content producers scared.
The next revolution in the media industry will be brought about by the ability to produce high quality, low budget content.
Things like the RED camera, HD video capable SLRs, point and click video editing software, easy access to compute farms are pointing to a future where video content will be as easy to produce as back in the 2000's where anyone could just put up a webpage with the tags <html></html>.
You can already see it happening and that is what has the old content producers scared.
What exactly are they scared of? Amateurs taking over professionals?
Can't see that happening as the public directs most of their attention to the professionals. On the other end of the spectrum, all of the talent and creativity go where the money is.
Can't see that happening as the public directs most of their attention to the professionals. On the other end of the spectrum, all of the talent and creativity go where the money is.
Not amateurs taking over - a new set of professionals, doing shows cheaper and quicker.
The production values might not be as good, and there will be a heap of terrible content produced, but there will be some hits.
The production values might not be as good, and there will be a heap of terrible content produced, but there will be some hits.
The current content producers are scared that people can produce the same content for cheaper.
This means if something is a blowout hit then it isn't the studios pocketing the money. The barrier to entry to a "professionally" produced show is a studio, good cameras, good editing, lighting, etc.
Think about how much cheaper all that has become.
This means if something is a blowout hit then it isn't the studios pocketing the money. The barrier to entry to a "professionally" produced show is a studio, good cameras, good editing, lighting, etc.
Think about how much cheaper all that has become.
This is not surprising news to me.
The issue is that the three owners (Comcast, Disney, News Corp) provide the most popular content on the service. In order to become a truly independent platform, Hulu needs to beef up its offerings so that the loss of any individual content partner would not be a big deal.
They are not there yet, though they are moving in the right direction with Hulu Japan, the Univision deal, etc. As of now, however, the major content partners still hold a large amount of power and the potential buyers saw this from miles away.
The issue is that the three owners (Comcast, Disney, News Corp) provide the most popular content on the service. In order to become a truly independent platform, Hulu needs to beef up its offerings so that the loss of any individual content partner would not be a big deal.
They are not there yet, though they are moving in the right direction with Hulu Japan, the Univision deal, etc. As of now, however, the major content partners still hold a large amount of power and the potential buyers saw this from miles away.
> In order to become a truly independent platform, Hulu needs to beef up its offerings so that the loss of any individual content partner would not be a big deal
Absolutely correct. The main thing is that the only viable independent platform, Netflix, has had serious difficulty maintaining agreements with content providers. That adds a lot of risk and uncertainty for prospective investors of an independent Hulu.
Absolutely correct. The main thing is that the only viable independent platform, Netflix, has had serious difficulty maintaining agreements with content providers. That adds a lot of risk and uncertainty for prospective investors of an independent Hulu.
The content providers are playing a dangerous game though, and it isn't clear they recognize it.
If they push the price too high then Netflix has the money to go directly to the production houses and buy shows themselves. I know they are experimenting with this now, but it is a model that will become more and more attractive.
If they push the price too high then Netflix has the money to go directly to the production houses and buy shows themselves. I know they are experimenting with this now, but it is a model that will become more and more attractive.
I think they do recognize it by this point. I think the pullback of Starz! was a key sign of this... the content providers were not comfortable handing Netflix so much power.
You bring up a good point about Netflix/Hulu going direct to buy their content. I think we are seeing early signs of this, but it has been taking time to gain traction. Some of the early Hulu exclusives such as "If I Can Dream" were epic failures. But there have been successes as well, such as "The LXD".
You bring up a good point about Netflix/Hulu going direct to buy their content. I think we are seeing early signs of this, but it has been taking time to gain traction. Some of the early Hulu exclusives such as "If I Can Dream" were epic failures. But there have been successes as well, such as "The LXD".
I think they have recognized the power Netflix has, but the withdrawl of Starz was overplaying their hand. That's going to push Netflix down the road of commissioning more shows themselves earlier than they need to. It's also going to encourage other, new content providers to enter the market.
The fact that some of Netflix shows failed isn't really relevant - the fact they commssioned them at all is the thing that should have content providers worried.
The fact that some of Netflix shows failed isn't really relevant - the fact they commssioned them at all is the thing that should have content providers worried.
The reason is here somewhere..
http://www.sjtrek.com/trek/rules/
http://www.sjtrek.com/trek/rules/
"We're going to sell you a company with assets which vanish in two years, after which time, you have a company with no assets and the right to negotiate for the right to use of the aforementioned assets at a price to be determined by us."
Yahoo may exhibit tremendous inability to derive value from acquisitions, but not even they were willing to take this time bomb.