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Questions Surround Hulu Auction

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DirecTV is not expected to submit a bid in the current first round, and observers see Apple as an unlikely bidder, but various online and technology companies have looked at the online video joint venture.

With first bids for online video provider Hulu believed to in the coming days, there is a slew of open questions about the auction.

Among them: Will Google bid for the joint venture now that it has already agreed to acquire Motorola Mobility for $12.5 billion in its biggest deal ever? Will all current owners end up selling their respective stakes or will some hold on to them? And  exactly what will suitors look to buy?

"It seems like the odds on Google are higher now that they have shown their hand on the TV market between the Motorola Mobility and [recent] SageTV deals,” said Janney Montgomery Scott analyst Tony Wible. Buying Hulu “would eliminate a potential competitor and add to YouTube’s share for ad supported [video business], while adding content for non-ad supported.”

Others though have argued that Google may not want to pursue two bigger acquisitions back-to-back to avoid too much attention from regulators.

Whether Google will make a play for Hulu, led by CEO Jason Kilar, or not, satellite TV operator DirecTV is not expected to submit a bid despite having looked at the company, according to sources. After competitor Dish Network's recent acquisition of Blockbuster and amid a fast-changing industry due to the rise of digital distributors like Netflix, DirecTV was looking at a Hulu play in the light of whether it would make it more competitive.

“The Hulu software has some nice aspects to it, but you also  have to kind of form a judgment about its business model and what you think that business model can generate,” DirecTV president, chairman and CEO Mike White had said during his second-quarter earnings conference call at the beginning of the month. “I think what we're looking for is: is there something there that would enable us to accelerate our TV Everywhere, but obviously I'd say it's critically dependent on the distribution relationships that it has in the contracts that underpin that. So, I think there's still more for us to learn and we really haven't made a final judgment on it.”

Since then, DirecTV's interest hasn't heated up though, and it is not expected to be among bidders, according to sources.

Meanwhile, Yahoo has been widely expected to bid, but some Wall Street observers caution that the cost of a deal could further drag down its stock and could potentially even put the Internet company itself in play.

One industry watcher suggested that Yahoo could buy out one or two of the current owners - Walt Disney Co., News Corp., NBCUniversal and private equity firm Providence Equity Partners – and take a stake rather than full control to make the deal more digestable.“That way you could also keep studio skin in the game,” one Street observer explained.

Other companies that observers have named as suitors are Amazon.com, which has been looking to become a bigger streaming video player and is seen as a more likely bidder than others, Apple, which hasn't been a big acquiror and is seen by many as unlikely to make a bid for Hulu, Microsoft and telecom giant AT&T.

Wible said in a recent Hollywood Reporter guest column that John Malone’s Liberty Media could also be a surprise bidder in the process, and some have also wondered if Charlie Ergen’s Dish Network may have quietly taken a look to add to his online content lineup.

Overall, 10-plus companies are believed to have looked at a possible Hulu bid.

Whoever acquires Hulu, "it will be a much stronger entity and could emerge as a strong competitor to Netflix," predicted Wible.

Meanwhile, current owners seem to have different levels of commitment to a sale of their respective stakes. Disney's Robert Iger said at the Herb Allen retreat of media and tech moguls in Sun Valley recently that the owners of Hulu LLC “committed to selling.”

But News Corp. president, COO and deputy chairman Chase Carey told reporters on the conglomerate's earnings conference call last week: "For us, it’s still a decision to see...what it looks like at the end. Does it make sense to pursue that path or does it make sense for us to stay in an ownership position and continue to have it driven by content owners."

STORY: News Corp. Quarterly Results From Continuing Operations Rise Amid Scandal

Especially in the case of a sale to emerging digital distributors that could rival pay TV operators, which provide a key revenue source for content companies, some owners may opt to stay involved in Hulu.

Another question that observers are curious about is what Hulu’s current owners will actually end up selling and for how much. While likely price tags had been seen in the $2 billion range, AllThingsD reported this week that the owners are looking for a bid price of at least $1.5 billion for the site and its licenses in the early going.

STORY: Hulu Auction: Initial Bids Due by End of Next Week

However, final price tags will depend on what a buyer is looking to acquire, AllThingsD said. For example, some of Hulu’s owners could decide to keep their stakes, which would reduce the price paid by a buyer. Alternatively, an acquiror could also pay up to increase the length of exclusive content licenses.

"The real gotta-have at Hulu are the content licenses," said Mike McGuire, research vp, media at Gartner about Hulu. "I think that is why any of these companies would want to have it."

Representatives for Hulu and all other companies mentioned declined to comment or couldn't be reached for comment.