The buyers of Hulu LLC will lose next-day rights to television shows that the service now enjoys under its current owners, Michael Eisner, former chairman of Walt Disney Co., said in an interview.
Eisner, who spoke yesterday on Bloomberg Television at the Allen & Co. conference in Sun Valley, Idaho, said he considered bidding for Hulu, the video service owned by Disney, Comcast Corp. (CMCSA:US) and 21st Century Fox Inc. (FOXA:US)
The price that suitors are willing to pay for Hulu has been driven by the value of the site’s programming, which mostly consists of prime-time comedies and dramas from ABC, NBC and Fox. DirecTV (DTV:US), owner of the biggest satellite TV system, and a partnership of Chernin Group LLC and AT&T Inc. (T:US) each bid about $1 billion, people told Bloomberg on July 9. Those companies want to build Hulu into the next Netflix Inc., Eisner said.
“If it is bought by a content-oriented production kind of company, it will then move from a company that is basically repeat broadcasting to original broadcasting,” said Eisner, 71. “That is very expensive. Therefore, the price you pay for the actual asset will be tempered by what you think you have to spend to make that asset work because NBC, Fox, ABC are not going to give you a great deal anymore on their own content.”
ABC and Fox are offering Hulu’s eventual buyer two years of rights for the $8-a-month Hulu Plus subscription service, which provides more programming on more devices, and a five-year extension of rights to the free service.
“The thing they are selling it as is near-term repeats of network programs,” Eisner said. “The sellers, Disney and the other two owners, are selling it and taking away basically the next-day availability of their content.”
Time Warner Cable Inc. (TWC:US), the second-biggest U.S. cable system, offered to become a partner in Hulu alongside the current owners, providing an alternative to an outright sale. A partnership of Guggenheim Digital and private equity firm KKR & Co. (KKR:US) left the bidding process on July 9, people with knowledge of the situation said at the time.
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