Will Yahoo Buy Hulu?

Yahoo! (NASDAQ:YHOO) may be trying to set gears in motion to get itself more prominence in the online video world, but its direction is still unclear.

According to technology news site AllThingsD, numerous sources close to Yahoo’s dealings said that Yahoo Chief Executive Officer Marissa Mayer had met with some of the top executives from Hulu. Given that Yahoo wants to increase its video presence and Hulu’s owners have been trying to sell, it seems likely that Yahoo could be considering an acquisition.

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The web-search giant has already shown an interest in acquiring video services. Within the past year — Mayer’s tenure with the company only began last July — Yahoo tried to purchase a majority stake in France Telecom’s Dailymotion video service. However, regulators blocked the purchase, saying that Yahoo couldn’t have a 75 percent stake in the company. The offer had been valued at $300 million, and it would have been the biggest purchase for Yahoo under Mayer.

Even though Mayer seems to be the major proponent for the push toward more video, Chief Operating Officer Henrique De Castro was said to have been the engineer behind the Dailymotion effort. Hulu might be a different story, since both Mayer and De Castro were reported to have taken part in the talks about the acquisition.

Though the talks may have only been preliminary, they should be taken seriously, as Yahoo had already expressed interest in purchasing Hulu in the past, when it was being shopped by News Corp. (NASDAQ:NWS), Disney (NYSE:DIS), and Comcast (NASDAQ:CMCSA) — its owners.

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One key part of any deal to get Hulu is the rights to video content. Hulu’s current owners are clearly major content owners, making it easy for them to keep the site loaded with consumer-enticing video, but its not so certain how Hulu would change if it gets sold to Yahoo.

News Corp, Disney, and Comcast are all major media owners, and Hulu has thrived off of their content. Even then, the website has been slipping. It was ranked among the top 10 video sites by comScore last year, but as of March, it was no longer included that group.

If the content of those three companies isn’t enough to keep up Hulu’s popularity, it may be less likely for Yahoo to go ahead with an outright purchase — especially since the companies only offered 2 to 3 years of rights to their video content. Without the content, the purchase isn’t likely to be worth billions of dollars.

However, there may be an alternative. Yahoo may be able to purchase a portion of Hulu and join News Corp., Disney, and Comcast as an owner. The sources said that News Corp. and Disney had considered the possibility of retaining some ownership of the site — Comcast is excluded as it sacrificed its management rights in concessions to regulators.

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The question remains of how significant a deal to get Hulu would be for Yahoo. The company already gets more video views than Hulu, but it could have a significant boost if it were to add all the content of Hulu to its arsenal. Yahoo may also be looking at other smaller video sites, like Blip and Grab Media.

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