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Analyst: Selling Hulu Would Be ‘a Mistake of Epic Proportions’ for Entertainment Giants

Memo From the Desk of Jason Kilar
Justin Sullivan/Getty Images

"Media companies should be going out of their way to retain ownership of Hulu and allow it to flourish,” BTIG’s Richard Greenfield says as initial bids for the online joint venture are due Wednesday.

NEW YORK - BTIG analyst Richard Greenfield said Tuesday that selling Hulu would be "a mistake of epic proportions" for content giants.

In a blog post entitled "Why Hulu Should Not be Sold: Build Long-Term Value versus Maximizing Near-Term Profits," the always-outspoken Greenfield said "we find it very hard to fathom why any media company would want to give up ownership of such a unique asset at such an early stage of growth." Why create a powerful third party with access to the best content like Netflix, he asked.

Greenfield in his argument particularly pointed to three trends in the TV industry: "too many ads on TV, TV on your own time (time shifting/place shifting) and the rising impact of social media on what consumers and their friends watch." Given those trends, "Hulu appears to be the perfect weapon for networks/content creators to embrace so they can grow revenues and profits, even if the current multichannel ecosystem becomes unglued over the next decade," Greenfield concluded.

Initial bids for Hulu, owned by Walt Disney, News Corp., NBCUniversal and private equity firm Providence Equity Partners, are due on Wednesday, with online, technology and other companies expected to submit offers. News Corp. has recently signaled though that it may decided to retain its stake in the venture, which is led by CEO Jason Kilar.

Greenfield acknowledged that running joint ventures is hard. But he compared Hulu to online music venture Vevo, which has aggregated advertising for music labels for videos that air on YouTube. "Nobody expects the labels to sell Vevo anytime soon - the labels are receiving attractive ad dollars for Vevo ads and have an equity stake in the venture," the analyst said. "Hulu is a similar concept."

Greenfield's advice: "Media companies should be going out of their way to retain ownership of Hulu and allow it to flourish. The bigger Hulu gets, the more dollars it can pay content creators on an annual basis.  While that may be true if it is owned by a third-party as well, being invested in Hulu and sacrificing near-term profits for long-term value creation appears far too compelling."

Email: Georg.Szalai@thr.com

Twitter: @georgszalai