Keeping Hulu Would Be 'Optimal' for Entertainment Company Owners, Analyst Says
"Is it really worth it to take $100 million-200 million of after-tax profit for each partner at the expense of losing control over your own destiny," RBC Capital Markets' David Bank asks.
NEW YORK - With the auction process for online video site Hulu continuing to drag on, RBC Capital Markets analyst David Bank said Thursday that the process could conclude without an actual sale, "and we think that would be optimal."
In a report, Bank said: "Despite several multi-billion dollar bids by interested parties, we believe joint venture partners News Corp., Disney and Comcast are increasingly viewing a sale of the Hulu asset as a Pandora’s box of potential channel conflicts and loss of control over the destiny of their networks' own programming."
His conclusion: "the broadcast networks could probably build greater brand equity in their own properties (online and offline) by retaining ownership of Hulu."
His argument focused on the longer-term benefits of owning Hulu, led by CEO Jason Kilar, versus short-term financial gain. "Is it really worth it to take $100 million-200 million of after-tax profit (assuming a $2 billion sale price) for each partner at the expense of losing control over your own destiny," Bank asked. "We think the networks are unsure of the answer to that, which has delayed a resolution to the Hulu sale. We also think there is a decent likelihood the networks will abandon the sale process for this reason."
Hulu was put in play in July when its board was approached about a deal by Yahoo, which has since pulled out of the bidding process. Multi-billion dollar bids have been submitted by Google, Amazon.com and Dish Network, but so far there has been no word on whether a sale will really happen.
News Corp. president Chase Carey has signaled that a sale is no foregone conclusion. The company's Fox also recently launched an eight-day delay for current TV shows available online for free, which applies to people who aren't subscribers of pay TV partners.
"We believe the eight day window tactic is indicative of the Pandora’s box that would be opened if Hulu is sold," Bank said. "By locking into any meaningful long-term programming distribution agreement (likely required by potential buyers to be no less than 3-4 years) with a third party, the networks are at risk of losing control of their own destiny in the digital distribution ecosystem, which over time has the potential to be the dominant distribution ecosystem versus traditional linear cable."
Earlier this year, BTIG analyst Richard Greenfield also suggested that Hulu's entertainment company owners should hold on to the site, but that otherwise, Google would be the most compelling buyer.