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Renewed licensing agreements increase Hulu's value, making it ready for potential buyers

Just yesterday, reports circulated that Yahoo had approached Hulu about a possible acquisition, but that Hulu wasn't showing any signs of selling. But today is a new day, and all of that has changed as Hulu placed a "for sale" sign on its window after reaching a licensing agreement with News Corp. to keep Fox programming on the streaming service.

Obtaining extended licensing agreements is important for Hulu on the open market because having such pacts retains its value. For instance, Hulu filed an IPO in the past, but it failed due to its lack of these agreements. 

Now, Fox Broadcasting Co. has renewed its licensing agreement. The good news is that this new licensing pact will bring Fox shows like "The Simpsons," "Family Guy" and "Glee" back to Hulu, which are shows that drew a large viewership in the first place. The bad news is that the agreement requires a "significant increase" in ad volume for Fox shows. This means that Hulu cannot control or limit the number of commercials aired, which could force Hulu to reduce CPM rates for advertisers. It will also be a major headache for viewers, since Hulu offers less than half of the average eight minutes of ads that is present in a half-hour's worth of television.

The advantage of having a heavier ad load would be increased revenue of the service, "which forgoes the conventional license fee in exchange for 70 percent of the revenues." 

There are a lot of open questions regarding this new pact, though. For instance, it is unclear what the length of the deal is and when Fox will start its increased ad time. In addition, the pact is not yet in writing, but is currently based on a handshake deal. 

But Fox has made it clear in the recent past that it wants to make cross-platform sales on television and the internet, which could enable it to join Nielsen's new Extended Screen measurement system. 

While all the details are not entirely present, the Los Angeles Times noted that Hulu has hired investment banks Guggenheim Partners and Morgan Stanley to attract possible buyers, which seals the deal on the "To sell or not to sell" rumor. 

Other reports expect Hulu owners Walt Disney Co. and NBCUniversal to extend licensing agreements as well in order to help the selling process along. 

In other news, Hulu recently announced that Hulu Plus, which is $7.99 a month, is now available in the Android Market. But it is only available for six Android devices, including Nexus One, Nexus S, HTC Inspire 4G, Motorola Droid X, Motorola Atrix and Motorola Droid ll. Hulu plans to increase the device compatibility list throughout 2011.

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RE: Correction
By MrBlastman on 6/23/2011 2:42:23 PM , Rating: 2
At the end of the day, to shareholders at least, it doesn't matter whether the buying company will succeed or not with the purchase--the only thing that really matters is if the buyer can come up with the money that was promised in the bid to pay for it.

Once the shareholders of Hulu have their money, I guarantee they could care less if it grows or not. Their involvement with Hulu is done at that point. The only exception is if the buyout is a cash + stock offer--i.e. in Yahoo's case, they might _not_ have enough cash to afford the deal, and instead may offer shares in lieu of cash or in conjunction.

Only in that case would it matter. The shareholders though have to vote to approve it in the end. If they're smart, they'll ask for cash and walk away--be done with it and have no strings attached... provided the price is right.

RE: Correction
By cerx on 6/23/2011 6:00:59 PM , Rating: 2
If it's something you built from the ground-up, you care a bit. Doesn't really apply here, just saying.

But the companies that do currently own Hulu will benefit greatly if it succeeds, as they're the ones getting paid. Since they don't want to cut off their own hand they'll sell to the owner that gives them the most in the long run.

"I modded down, down, down, and the flames went higher." -- Sven Olsen

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