Monday, December 20, 2010, 10:45 PM ET|Posted by Will RichmondThe WSJ is reporting that Hulu has pulled its widely-rumored plan for an initial public offering next year due to lack of long-term rights to distribute its three broadcast TV network owners' content. The WSJ says the company may look at other options to raise capital. Hulu's exclusive short-term distribution deals with owners ABC, FOX and NBC are the company's primary asset, and no doubt banks and other would-be investors closely scrutinized whether the rights would be extended.
As I wrote last April, from a content rights perspective, Hulu is getting squeezed from all sides. Pay-TV providers are ramping up their TV Everywhere rollouts and are trying to lock down online distribution rights themselves, sometimes as part of retransmission consent deals. The NBC rights in particular are subject to extra uncertainty longer-term as Comcast takes over the network. As the biggest subscription TV provider, which is rolling out its own online capabilities, Comcast has little incentive to support an online competitor.
Meanwhile Netflix has emerged as a ferocious competitor for catalog rights. It scored recent deals with both Disney-ABC and NBC Universal to license some of their most popular shows, signaling that even Hulu's main backers are being tempted by Netflix's rich licensing offers. More troubling, as I reported last month, is the fact that 88% of Hulu Plus subscribers are also Netflix subscribers. That means that the vast majority of Hulu Plus' subscribers are able to compare the two offerings, which as Netflix's list grows, will dissipate Hulu Plus' value proposition. As if all this wasn't enough, Google/YouTube is poised to make a big push for Hollywood content distribution/monetization in 2011 too.
Oddly, the WSJ also reports that Hulu is considering additional subscription ideas. Though no details are provided, it's difficult to see where it would turn for rights or how it would segment the market and still retain value in Hulu Plus. While CEO Jason Kilar recently upped Hulu's 2010 revenue forecast to $260 million, and said Hulu Plus' contributions are "material," I remain skeptical. Hulu's created a terrific UI and has been monetizing its free content well but now it needs to figure out how to gain more subscription-based content while operating in a land of giants. That won't be an easy task.
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