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Analysts Weigh in on Possible Hulu Sale

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While some say a single owner could make the online video site a bigger threat to Netflix, Credit Suisse's Spencer Wang says, "I would not expect a major impact on Netflix."

NEW YORK - Wall Street analysts on Wednesday suggested that a range of tech and media companies, as well as financial firms could consider a play for online video site Hulu if it formally goes on the block.



Saying a sale could fetch around $2 billion, they argued that a single owner would make the online video site's decision making more effective.



Hulu is owned by private equity firm Providence Equity Partners, Comcast’s NBCUniversal, which has a non-voting stake, Walt Disney and News Corp. "These content company owners separately started making some of their content available in various windows on services other than Hulu’s, such as Netflix, which upset other owners," highlighted Miller Tabak analyst David Joyce. "As such, the disparate corporate interests again have made a joint venture difficult to sustain."



Some observers even suggested that a deal could turn Hulu into a bigger threat to Netflix's video streaming service. "There may be an opportunity to forge better partnerships with the core TV content and broadband/distribution companies and take some subscriber market share from Netflix," Joyce said.



But Credit Suisse analyst Spencer Wang argued: "It depends who it is, but generally no, I would not expect a major impact on Netflix." He added: "They have a big early lead and are excellent operators."



Late Tuesday, it emerged that a suitor had approached Hulu about a possible deal, which has led Hulu's board to look at hiring investment banks to look for possible additional buyers. According to the LA Times, Yahoo made the Hulu approach.



If there was an auction, "I would not be surprised if it sold for $2 billion given the prices we have seen on Skype and other recent deals," said Janney Montgomery Scott analyst Tony Wible. Joyce pointed to Hulu's consideration of a potential IPO last year, which also eyed a $2 billion valuation.



Asked about Yahoo's potential motivation for a Hulu approach, Joyce said: "[CEO] Carol Bartz needs to do something soon or else she could be out."



Citing comScore Media Metrix data, he also highlighted that Hulu has "the most-monetized user base in terms of the gross number of video ads and the frequency of ads per viewer."



Wible said Liberty Media, Microsoft and satellite TV giant DirecTV, whose competitor Dish Network has been building out its online content offerings, could make sense as Hulu suitors, although he emphasized that "I think there is more want than need."



Joyce said he would also not count out Ebay, Apple, Google, "which has also been trying to gain traction with its Google TV efforts," Amazon.com, "which has stellar consumer transaction relationships and has supposedly been readying a Netflix competitor," and WalMart given its home entertainment strength.



Some have also wondered if AOL, which has emphasized online video under CEO Tim Armstrong, could be interested. But management has said it is currently not looking for major acquisitions.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai