DirecTV (Nasdaq: DTV), which depends on wireline service providers for its broadband connections, is reportedly stepping up in the line of those queued to acquire broadband-dependent content provider Hulu.
According to a story by Michael Carney in PandoDaily, "sources with knowledge of the ongoing Hulu acquisition talks" say that DirecTV is the frontrunner to buy the service and that the acquisition price "will be written with a 'B' … but just barely."
The article paints a positive picture for the acquisition.
"First, DirecTV is one of the select few companies with the resources and wherewithal to absorb Hulu and retain or increase its value. Second, Hulu fills a gaping hole in DirecTV's offering in a way that it would be hard pressed to achieve by any other means," Carney wrote.
Carney's opinion was echoed by Motley Fool contributor Eileen Rojas, who pointed out that in addition to the web presence Hulu would offer, "DirecTV's current relationship with Hulu's present owners can help the company obtain more favorable programming rights."
Hulu, which is jointly owned by Walt Disney Co. (NYSE: DIS), News Corp. (Nasdaq: NWSA) and silent partner Comcast (Nasdaq: CMCSA) via its NBCUniversal unit, has made it clear that it wants to be acquired. Besides DirecTV, other rumored suitors include Yahoo! (Nasdaq: YHOO) and AT&T (NYSE: T), the Motley Fool article said.
DirecTV's motivation might be fueled, in part, by a desire to keep the web content provider out of the hands of potential OTT competitors like Yahoo and wireline players like AT&T, Rojas wrote.
"By offering content through Hulu, the company can lessen the impact of an ongoing trend among certain customers who leave cable and satellite service due to the high cost" which would "benefit DirecTV in the long-term as more and more content moves to the Internet."
That would be the key point for a Hulu acquisition: an online presence with its own brand.
"In online video the only names that matter are Hulu, Netflix and Amazon, although YouTube and possibly iTunes could be considered dark horses," Carney noted. "Not only would acquiring Hulu be a value-add to DirecTV, but it would be a wise defensive move to keep it out of the hands of its direct competitors."
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