Analyst: Google Would Be the 'Most Compelling' Buyer of Hulu
BTIG's Richard Greenfield in a blog post also runs through the pros and cons of a sale of the online video venture to the likes of Yahoo, Amazon.com, DirecTV and AT&T.
NEW YORK - Google would be the most compelling winner of the auction for online video joint venture Hulu, BTIG analyst Richard Greenfield said Thursday.
"The buyer that is probably most compelling is Google," he wrote in a blog posted entitled "Top 10 Potential Hulu Bidders: Analyzing Who Should Win and Why?" But he reiterated his thought from earlier in the week that it would be best if current owners Walt Disney, News Corp. and NBCUniversal continued to own Hulu, arguing that it would be "a mistake of epic proportions" to sell.
"Google wants to be a much bigger player in video (think YouTube, Google TV, Motorola Mobility etc.) and Hulu would appear to be the perfect “fit” to accelerate that strategy," Greenfield said in explaining why the Internet search giant would be the most compelling new Hulu owners. "From the current owners of Hulu’s perspective, Google is also quite attractive, given very deep pockets and expertise in selling online advertising - the bigger Hulu gets, the more it will be able to acquire content rights from media companies."
Plus, Greenfield argued that a Google-Hulu deal "would create a strong third player in the digital video arena alongside Netflix and Amazon - while Hulu is already “that” third-player in its current structure, its current owners are unwilling to invest capital into Hulu so it can buy more rights from them, such as catalog TV and movie content."
Meanwhile, the biggest negative of a Google-Hulu combination would be Google itself "in that many of the media companies fear the size and importance" of the Web giant, the analyst suggested. Plus, he predicted regulatory risk given Google's size and market power.
Initial bids for Hulu are due this week, and many open questions remain.
As far as Amazon.com goes, Greenfield also sees advantages of a Hulu purchase, noting that the e-tailer appears "increasingly ambitious" in online video and that Hulu CEO Jason Kilar used to work at Amazon. "It could also create a unique marketing advantage for the coming Amazon tablet - imagine a free six months of Hulu Plus if you buy the Amazon tablet," the analyst said.
On the downside, Amazon has never been in the advertising business, which is the core revenue source for Hulu, Greenfield highlighted.
What about another big online player that is believed to be in the hunt for Hulu - Yahoo? "Desperation does funny things to your strategic decision-making," said the analyst. "Yahoo could use Hulu to build video engagement...That being said, content owners are likely to be concerned that Yahoo does not have the deep pockets they would like to buy content beyond the initial acquisitions rights."
Plus, he echoed comments from others on Wall Street that Yahoo shareholders could protest "an unnecessary acquisition, fearing Yahoo will find a way to screw it up."
Meanwhile, satellite TV provider DirecTV could win unique content to promote to its subscribers in a Hulu deal - similar to its NFL Sunday Ticket. "However, DirecTV owning Hulu could make it more difficult to gain authentication deals with cable operators who see DirecTV as a direct competitor and who desperately want access to the NFL’s Sunday Ticket content," Greenfield said in highlighting the risks.
AT&T, whose U-Verse service competes with satellite and cable TV firms, could get from Hulu "something to differentiate their bundling offering" and "unique content as they roll out next generation wireless service offerings," the BTIG analyst wrote. "That being said, given the technological hurdles of a largely DSL broadband subscriber base and limited geographic coverage, not to mention no real experience in running an ad-driven Internet start-up, we find AT&T a challenging fit."