Hulu’s parent companies – Disney, News Corp, Comcast, and Providence Equity Partners – have put the Web TV site on the block.Google is a likely buyer.
According to one source familiar with YouTube’s strategy, the people who run Google’s video site would love to direct some of its 140 million or so viewers into a Hulu-branded channel for premium content and premium brand advertising.
YouTube boss Salar Kamangar has been trying to turn the site into a destination for premium content for a while now. Lucky him, Google has more than enough cash to make the kind of multi-billion dollar offer Hulu is looking for. It also has a new CEO who is in love with making bold bets and has seen that acquisitions can really pay off.
So what’s the hold-up?
Ask a top industry journalist, an M&A insider, and a source at Yahoo – which also wants to buy Hulu – and they’ll say the reason Google can’t buy Hulu is because the deal would be blocked or mangled by anti-trust regulators.
This makes sense.
After all, Google is utterly dominant in the lucrative search industry, and its competitors – Microsoft and Facebook in particular – spend a lot of money trying to make Washington nervous about it.
Also, we’ve seen antitrust concerns kill Google deals before. Last year, Groupon’s board of directors declined a $6 billion takeout offer from Google after Google refused to agree to a multi-billion dollar breakup fee.
But we don’t buy it.
Here are 5 reasons we don’t think antitrust concerns will stop Google from buying Hulu:
- Most importantly, Hulu’s owners aren’t worried: A source familiar with the situation tells us Hulu’s owners aren’t concerned about antitrust regulators blocking a deal or slowing it down too much. That means they’re less likely to ask for the kind of big break-up fee that killed the Groupon deal.
- Hulu doesn’t dominate the market. Hulu is only the tenth most-popular video destination, according to ComScore. It’s bested by Facebook, AOL, NBC, Yahoo and more.
- Google doesn’t dominate the market. Google owns the search mark and, for what it’s worth, the user-generated video market. But those are different markets than the premium brand advertising market. In that market, Google is still a small player; it even trails Facebook. In the broader ads-sold-against-video market, Google is behind all the major TV players – including Hulu’s parent companies News Corporation, Disney, and Comcast.
- Regulators allowed XM/Sirius to merge. Even though they were the only two companies in satellite radio companies, XM and Sirius were allowed to merge because they successfully argued they were both competing in a larger market dominated by terrestrial radio. Google will likewise argue that even though Hulu/YouTube will be join to form a huge Web video site, it will actually be competing with traditional TV, Netflix, Amazon, and Apple in the premium video market.
- Hulu is getting lots of interest from a range of potential bidders. If Google has to outbid a bunch of other companies in order to buy Hulu, that makes it difficult for those other companies argue that the space isn’t competitive and to complain about Google later. It just looks like sour grapes to regulators. That’s what happened when Google bought DoubleClick after out-bidding Microsoft.
Google and Hulu both declined to comment on this story.
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