Reports are flooding in this morning that Yahoo (NASDAQ:YHOO) has submitted a preliminary offer to buy online TV streamer Hulu. The company is jointly owned by several news-media titans, News Corp (NASDAQ:NWSA), Disney (NYSE:DIS), Comcast (NASDAQ:CMCSA) among them. Hulu has struggled to strike a balance in its business model, weighed down by constant negotiations between owners over broadcasting rights, content availability, and other concerns. The web business recently started offering a for profit service “Hulu Plus” that offers users access to a wider range of television programming and movies, in addition to the content normally available for free on the site.
According to The LA Times, Hulu has not made it clear whether or not it is interested in a sale, “Hulu has not taken any traditional steps associated with a sale such as retaining an investment bank to field offers. However, it is currently undergoing a restructuring that would give Chief Executive Jason Kilar and his executive team greater autonomy.”
Conflicting reports from other news outlets, such as this story from TechCrunch contend that the “unsolicited bid” made by Yahoo (NASDAQ:YHOO) is bogus and false. Michael Arrington claims, “I’ve just received an unsolicited message from a source close to Yahoo that says it’s completely untrue,” though the writer adds that Hulu is interested in a buyout, and has hired Morgan Stanley (NYSE:MS) to represent the company in such talks.
It’s more likely than not that the WSJ and LA Times (outlets that broke the story this morning) had reliable sources before printing the news, so apologies to Mr. Arrington, but for the time being we will work under the impression that Yahoo is really considering taking on Hulu. However, would the move make sense for Yahoo, or Hulu, for that matter?
The move could be a boon for Yahoo, a company that has flailed in its attempts to keep up with leading web and search engine competitors Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT). Both companies have expanded their business lines to include off-web products, (ie Android Phones, XBOX), whereas Yahoo has limited its services to strictly web-based ideas. Hulu could be a game changer for the company, which has stagnated in recent years in terms of growth, stock price, and user base.
The acquisition would expand yahoo’s business ambit broadly, and give the company exposure to a slice of the film and media industries which it could use to leverage further expansion. The big question is whether or not Yahoo is ambitious enough to take on that risk. With Netflix (NASDAQ:NFLX) dominating the rental business and transitioning seamlessly into streaming, YHOO would face an uphill battle in claiming its market share, but Hulu offers a promising start. Hulu already has an edge over Netflix in that its free, add the fact that Hulu’s board contains members of nearly every major television and film studio (which would help in negotiating costs for broadcasting rights), and is already very popular across demographics, and you have the makings of potentially thriving product.