Still in the news for reports of its Tumblr buy, Yahoo (NASDAQ:YHOO) has video service Hulu in its sights next. Reuters reports that a formal bid was already made by Yahoo, as the company goes up against at least four major competitors out to take over the service that is owned by Disney (NYSE:DIS) and News Corp (NASDAQ:NWS).
One of the competitors is News Corp itself, which is looking to gain majority control after differences with Disney and third owner Comcast (NASDAQ:CMCSA) have led to stalled development within the company. While growing the subscription base is one direction for the new owners to take it, others believe beefing up the overall users through free content is the path to a greater payoff down the road. News Corp’s recent offer was in the $500 million range, though the cost of content would have made the commitment more substantial.
For Yahoo, the opportunity to pick up a second major property in a fortnight is an encouraging sign for investors in the Marissa Mayer era. Mayer told The Wall Street Journal that the company’s path to success via Tumblr would come through an increase in page views and other actions on Yahoo sites. Bringing a seasoned sales force to sell ads on Tumblr would be the method to bringing in revenue. Depending on how the deal for Hulu breaks down, it could be another move in that direction for Yahoo.
In streaming video, Hulu is one of the major players after Netflix (NASDAQ:NFLX) and would bulk up Yahoo’s holdings significantly. Since the deal for Tumblr was paid for in cash, the purchase of Hulu would have to include financing for the majority of the sale price. Analysts are guessing that Hulu will sell for over $1 billion, regardless of the offer by News Corp.
Investors questioning the purchase of companies like Tumblr and Hulu can compare the acquisition of YouTube by Google (NASDAQ:GOOG). Though YouTube’s complexion changed slightly after the sale, Google took a company that had little revenue with a $1.65 billion price tag and made it a profitable investment. According to The Wall Street Journal, Yahoo also added 90 engineers to its fold in the Tumblr purchase. The company hopes the purchase of Hulu would be just as successful.
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