Providence-Backed Hulu Sells Stake to Disney

(Reuters) – Walt Disney Co will buy a 30 percent stake in Hulu.com, bringing popular TV shows such as “Lost” and “Grey’s Anatomy” to the video website founded by NBC Universal and News Corp.

Disney’s entrance, which comes after months of negotiations, means that three of the four major U.S. broadcast networks now have stakes in Hulu: NBC, News Corp’s Fox and Disney’s ABC. Only CBS Corp is absent.

Hulu officials declined to provide financial details on the deal on Thursday. A source directly involved in the deal, who did not want to be identified because all sides in the deal decided that the terms would be confidential, put Disney’s stake at 30 percent, the same as the other networks.

Disney will get three seats on the 12-member board, the same as News Corp and NBC Universal.

Hulu has emerged as one of the most popular online video destinations since its launch in 2007. Though it still lags Google Inc’s YouTube, some 380 million videos were viewed on Hulu last month, up 14.3 percent from February, according to market research firm comScore. It is now among the top three online video sites in the United States.

Conversations with CBS are continuing, said Hulu Chief Executive Jason Kilar. “We’d love to have them be a part of Hulu … ultimately it’s their decision,” he told Reuters in an interview.

In a statement, CBS did not directly address its future plans regarding Hulu. The company said it believes in “controlling our own rights” for content across media.

“CBS has long employed open, non-exclusive content partnerships that allow fans across the Internet to engage with our programing in such a way that we control our distribution, sales and profit,” it said.

When asked if CBS could join Hulu as an investor, News Corp Chief Operating Officer Peter Chernin told Reuters, “I’m not sure there’s room, legally or economically, for another partner, but I think Hulu has consistently said they’d like to license CBS content.”

Other media companies, including Viacom Inc, provide movies or TV shows to the website, but in deals that involve advertising revenue sharing and not ownership stakes.

The only other ownership stakes are held by Providence Equity Partners, which has two seats on the board, and employees of Hulu, whose chief executive has one seat.

Disney has previously sought to expand viewership of ABC shows offered on its website and its local affiliates’ sites, on AOL.com and on Comcast Corp’s Fancast site.

HULU EYES MUSIC, WORLD

To grow further, Hulu is studying adding music videos, sports and news, while it is also looking at expanding the service outside the United States.

“We would like to continue to have as much premium content as possible,” said NBC Universal Chief Executive Jeff Zucker in an interview. NBC is a unit of General Electric Co

“Then expand Hulu internationally — that should be the goal for 2010,” Zucker added, declining to say what markets the partnership is considering.

Elsewhere, big cable network owners are working on plans to move more of their shows online but are trying to devise strategies that do not undermine the lucrative cable-network-affiliate-fee business model.

Time Warner Inc Chief Executive Jeffrey Bewkes is championing “TV Everywhere,” a plan that will allow subscribers to watch cable TV shows online that they’ve already paid for with their package. Comcast is working on a similar plan called Online On Demand.

Disney shares rose 4.2 percent to $21.90 on the New York Stock Exchange.

(Additional reporting by Yinka Adegoke and Robert MacMillan; Editing by Lisa Von Ahn, Brian Moss and Brian Moss)

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1 Comment

  • The average American watches about 20 hours of TV per week. If Hulu charged its subscribers $39.99 a month it would be generating an average of about 50 cents per hour of programming served, more than enough to support the production of an expensive show like “Lost”. With this kind of a subscription model there wouldn’t be any need for spot advertising. It could be commercial free and still make money.

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