Hulu Buyers Would Get Exclusive Content, With Strings Attached

A few days after the news first broke that Hulu is for sale, we know a bit more about what, exactly, that means. Here’s where things stand right now.

Hulu’s owner/partners — Disney’s ABC and News Corp.’s Fox — have finished their deals extending their content licenses, which have been in the works for a while. As PaidContent noted last week, those deals will stay intact if Hulu is sold. (Hulu’s third owner/partner, Comcast/NBCU, doesn’t have a management role in the company, and has to follow its two partners. So it’s in, too.) That boosts Hulu’s sale value.

The network’s content deals are exclusive, more or less. It’s theoretically possible for the broadcasters to show their stuff on other online outlets, but they’ve determined that they’ll get the best bang for their buck at Hulu. “We don’t intend to have these shows available anywhere else,” says an executive at a Hulu owner. (Hulu’s three partners continue to have the rights to put their shows up on their own corporate-owned sites.) That’s a big plus for a prospective buyer.

Hulu’s owners do plan to increase the amount of time it takes for a TV show to move from broadcast to the Web site. Right now, almost all broadcast shows end up on Hulu.com the day after they air. But as the Los Angeles Times reported last week, Hulu’s broadcast owners plan to push that window back as much as eight days unless viewers can prove they are cable or satellite TV subscribers. Sources familiar with the site tell me this “authentication” plan won’t kick in right away — for one thing, the systems needed to implement it aren’t built yet. But the fact that it’s in the works could diminish Hulu’s value, since it will limit viewership.

Hulu CEO Jason Kilar might be very happy to see a sale. Kilar’s relationship with his broadcast owners has been strained, and his employment contract is up next month, leading to lots of speculation that he was out the door. A new owner with deep pockets willing to fund more rights deals like Hulu’s Viacom pact might help keep him engaged, though. Another upside to the sale: A chance to cash out the equity stakes Kilar and his employees hold.

Providence Equity Partners, which put up $100 million to seed the company in 2007, has a put option that kicks in during 2012. That could force the broadcast owners to hand over a chunk of cash if the company hasn’t already sold or gone public by then. But people familiar with the company tell me that the option isn’t driving sales talks, and that News Corp. and Disney are willing to make the payments if necessary. (News Corp. also owns this Web site.)

So that helps clear things up, just a bit. We might hear more about other known unknowns — like, when do the new content deals expire? — as Hulu begins opening the kimono for potential buyers over the next few weeks. Ditto for the list of potential buyers, which begins with Yahoo and Microsoft, but extends to just about anyone who can rustle up at least a couple billion dollars.

Also bear in mind that some of the terms discussed above can change if someone shows up with a truly preposterous amount of money. One executive familiar with the company notes the parable of Netflix, where CEO Reed Hastings couldn’t get Hollywood studios to deal with him, until one day they did, because he was able to write significant checks.