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Google has begun preliminary talks to acquire video-streaming service Hulu, according to unnamed sources in contact with the Los Angeles Times.
Last week, Hulu took steps to put itself up for sale by retaining investment banking firms to facilitate a potential acquisition. The company also concluded deals with its media partners and owners to extend licenses to stream exclusive film and television programming through the service — a necessary move since Hulu’s value is heavily tied to its library of content.
Hulu’s exclusive television content has attracted more than 600 major advertisers, including Nissan, McDonald’s and Johnson & Johnson. The company is expected to rake in $500 million in revenue from ad sales and fees from its premium subscription service.
Despite its financial success, Hulu’s various owners — which include Comcast, News Corp., Disney and Providence Equity Partners — rarely see eye-to-eye on which direction the business should pursue. Selling Hulu is a very attractive option since it would allow each media company to pursue its own content streaming strategy.
The news of Google’s interest in buying Hulu is contrary to earlier reports that explicitly stated that the search engine giant was not among the list of potential buyers. Reportedly, Yahoo was the first to make Hulu an acquisition offer. Both companies have declined to comment on that report.
These reports could well spark a bidding war over Hulu. Both Yahoo and Google could benefit from the acquisition of such a large library of exclusive programming from NBC-Universal, Fox, ABC and Viacom.
For Yahoo, adding Hulu to its fleet of services would allow the company to extend even further into the online video market. The company purchased social television startup IntoNow in April and lost a bid to acquire movie website Flixster (along with Rotten Tomatoes) in May. Rumors have also circulated that Yahoo would like to replace its current CEO Carol Bartz with Hulu’s CEO Jason Kilar.
Yet, Google could arguably leverage Hulu to greater effect. The company has been largely unsuccessful in its attempt to add popular licensed content to its YouTube video service. Acquiring Hulu would give the company a foot in the door to Hollywood as well as a team of people to manage relationships with movie and television studios.
Google and Yahoo are hardly the only companies who would benefit from acquiring Hulu. If social networking giant Facebook or streaming-video service Netflix were to join the bidding war, things would definitely heat up fast.