Apple Said to be Looking at Hulu Purchase

| Rumor

Apple is apparently interested in making a bid for the online video subscription service Hulu. Word of Apple’s interest comes courtesy of unnamed sources who claim the Mac, iPhone and iPad maker has started talks with Hulu, but hasn’t formally joined the list of potential buyers, according to Bloomberg.

Hulu is currently owned by NBC Universal, Disney, Comcast and News Corp, and competes with Netflix and Apple’s own iTunes Store. Apple doesn’t, however, offer a subscription video service and instead offers movie and TV show rentals and purchases.

Apple interested in Hulu? MaybeApple interested in Hulu? Maybe

While purchasing Hulu would give Apple a ready-to-go video subscription service, so far the company has seemed content to stick with its content purchase and rental business model. Hulu’s current owners may not be interested in selling to Apple, either.

Giving Apple control of Hulu isn’t likely something the movie and TV studios would relish, especially considering one of the reasons they backed the video company initially was to try to limit Apple’s control over the entertainment industry. Intentionally handing that control over to Apple, even with a likely US$2 billion price tag, would be a bitter pill to swallow.

As part of the deal, the studios are said to be offering Hulu’s buyer an additional five years of program rights, along with the promise of exclusive access to content for two years. That might be enough to make Apple’s executives seriously consider a bid, although it also may make studios leery of handing over access to so much of their content to the company that made the iTunes Store.

Apple hasn’t commented on whether or not it has any interest in buying Hulu, so for now the reports should be treated as nothing more than rumors.

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2 Comments

ibuck

Could Apple’s interest be that of driving up the price, making it harder to compete with Apple?

Or could Apple’s interest force regulatory involvement that would benefit consumers through competition ? same content available from multiple vendors?  That is, NBC Universal, Comcast and News Corp having to make their content available through Apple as well as Hulu’s buyer?

Nemo

Apple’s interest is in getting Hulu to enhance the ecosystem that sells its OS X and its iOS devices.  To make a bid that satisfies that interest, Apple must satisfy these factors:

1.  Given Apple’s interests, supra, can Apple purchase Hulu from the Studios, NBC/Universal/Comcast, News Corp, and Disney, at a price that is worth the rights to access that the Studios will offer?

And

2.  Right now the deal seems to be two years exclusive right to access and five years right to access, which I assume are to run consecutively.  But Apple isn’t going to want a deal that expires in five or seven years that leaves its customers suddenly without access to content that they have become accustomed to, and Apple then having to negotiate with the Studios for right to renew access to Hulu’s content.  Apple will want some deal that grants it the right to perpetual renew iTunes’ right to access pursuant to agreed upon terms.  Will the Studios offer terms with a perpetual right to renew on terms that are acceptable to Apple?

Apple may be interested in buying Hulu, but only if it can get terms that don’t exceed the value of the rights to access to Hulu’s content.  And Apple will probably require that those rights to access be perpetually renewable.  And, as Jeff notes, supra, the Studios would rather not sell to a party, like Apple, Google, Microsoft, et al., who will use Hulu’s content to enhance its ecosystem and who, therefore, are prepared to offer subscriptions to Hulu’s content at close to breakeven prices. 

And of such parties, the Studios probably hate Google far more than Apple, because of YouTube’s record, until lately and after a long court battle, of being a facility for the unlicensed access to record labels and studios’ content.  And Google’s latest stunt of permitting its Android device users to copy their music libraries into its cloud has only intensified the Studios’ hatred and distrust. 

Apple, on the other hand, apparently obtained licenses from the record labels for its new iCloud service, which gives the Studios some sense that in Apple they are dealing with a party that respects their IP rights in their content.   

So Apple and the Studios may get to a deal, but it will be a tough negotiation.  And I wouldn’t bet the house on Hulu’s content appearing on iTunes.

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