Yahoo would pay up to $2 billion to buy Web TV site Hulu from its current owners – Disney, News Corporation, Comcast, and private equity firm Providence Equity Partners – a source familiar with Yahoo's M&A plans tells us.
But Yahoo's corporate development people will only bring that type of deal to the Yahoo board if Hulu's owners can guarantee Hulu will have four or five years of exclusive access to current TV shows and older movies.
Bloomberg published a report yesterday that suggested Hulu's owners are only willing to offer Hulu's new owner five years of access, but only two years of exclusivity.
"If [Hulu's content creating owners] came out and said, we've renewed [Hulu's exclusive rights] for four years at the same terms we have today – it's really easy to model [a valuation between] $1 billion and $2 billion – maybe more," says this source.
Without four or five years of exclusive streaming rights to TV shows and movies, Hulu is "not worth anything."
Hulu has some "nice technology," but if it doesn't come with exclusive rights, Yahoo would probably be better off just submitting a competing bid for the right to stream TV shows and movies.
"It would cost a lot less."
On the other hand, If Hulu had exclusivity for four or five years, that would gives Hulu's new owner – Yahoo, in this scenario – enough time to "build enough equity with consumers that you've created a real leader in premium content and premium advertising."
Yahoo's valuation of Hulu might be irrelevant.
A source who attended investment bank Allen & Company's recent retreat for moguls in Sun Valley, Idaho tells us that Disney CEO Bob Iger spent time pitching Google and Microsoft on Hulu. Bloomberg reports that Amazon has also shown interest.
All three of those firms have more money to throw at a big deal than Yahoo does.
Google is considered a highly likely suitor for the Web TV site. It has the cash on hand to make a multi-billion offer, and it's very interested in selling brand ads against premium video content. Google is also already planning to spend $100 million producing premium content for its own Web video site, YouTube.
Two roadblocks for Google are: anti-trust issues that prevent it from pursuing many deals and the mix of antipathy and fear Hulu's current owners (other than Providence) have for the search giant.
Amazon, too, has big money to spend, but it's already developed something of a brand in entertainment, and it may just end up deciding to bid for the right to stream TV shows and movies as soon as Hulu's exclusivity ends.
