Walt Disney, through a subsidiary of ABC Enterprises, will buy a chunk of online video provider Hulu.
While Hulu declined to provide financial details on yesterday’s deal, Reuters cited an unidentified source that said Disney’s stake would be 30 percent once the transaction is completed. If the 30 percent stake is true, that would put Disney on equal footing with Hulu stakeholders News Corp., which owns Fox, and NBC Universal.
News Corp. and NBC Universal launched Hulu in 2007. The ad supported-site had 380 million views of its videos last month, which was a 14.3 percent increase over February.
The deal with Disney will give Hulu viewers access to ABC shows such as “Lost,” Gray’s Anatomy,” and “Ugly Betty,” as well as some Disney films.
With Disney/ABC onboard Hulu is just missing CBS Corp. from its content puzzle. It also has content agreements with three of the largest six film studios. Hulu chief executive Jason Kilar said negotiations with CBS were ongoing, according to Reuters.
The transaction is subject to customary closing conditions, including regulatory review. As an equity partner, Disney will have three seats on the Hulu board, which is the same as News Corp. and NBC Universal. Providence Equity Partners has two seats on the board while Hulu has one.
What remains to be seen is whether Hulu will get access to the full slate of ABC shows right after they air, or if ABC keeps some of those shows back to stream from its own Web site.
According to published reports, NBC Universal and Fox renewed their two-year exclusive contracts with Hulu as part of the Disney deal, which means Hulu competitor YouTube will have to negotiate with Hulu for those shows.
Cable to hook up with Hulu? Not likely
One interesting take on the Disney/Hulu news was provided by Forrester Research analyst James McQuivey, who told CNET that the cable industry could benefit from partnerships with Hulu.
Instead of negotiating deals themselves, cable operators could gain access to Hulu’s deals with content providers, according to McQuivey. He also said cable operators could strike “premium” deals with Hulu that would allow them to show content to their cable subscribers that wasn’t available to all Hulu users.
Lastly, he said Hulu and the cable operators could split the revenues from such a joint venture.
McQuivey’s take seems to fly in the face of cable operator executives saying they don’t want to become a “dumb pipe” for over-the-top Internet video providers such as Hulu and Vudu.
While Time Warner Cable is in negotiations to buy Joost (see story here), the nation’s second-largest cable operator is pursuing its own “TV Everywhere” plan to offer its subscribers more video content over the Internet. Comcast has a similar initiative called “Online On Demand.”
While the cable industry doesn’t want to miss the boat in providing online content to subscribers, it can bank on its long standing relationships with studios and content providers. And cable has Canoe Ventures as its ace in the hole, which will have a much longer reach than Hulu’s ad supported model.
In short, it might make sense for small to mid-sized cable operators to use Hulu or Vudu to provide their customers with online video content instead of building out their own delivery systems, but it doesn’t seem likely that the larger MSOs will get in bed with Hulu anytime soon.