Hulu-Time Warner deal unlikely, and shifting content licensing strategy could be a disaster, analysts say

As reports swirl that Hulu is in talks to sell a stake in its business to Time Warner, a few industry watchers see the deal as not likely to happen, particularly under Hulu's current licensing model of next-day availability of broadcast content. Making a few changes to that licensing model, however, might make the SVOD provider more attractive to potential buyers.

At least, that's the feeling that Re/code's Peter Kafka has. Time Warner is probably not interested in seeing its content stream the day after it airs, he said in an article about the rumored deal. The corporation, which owns HBO among other properties, has stated it doesn't want its content appearing on rival services for several years after its air date.

"It's hard to imagine any scenario where Time Warner invests in Hulu without a significant change in the way it operates," Kafka said. "So if Time Warner does put money into Hulu, it's likely going to be a very different kind of Hulu from the one that exists today."

What kind of changes would those be? Kafka speculated on some new licensing models for Hulu based on comments by Rupert Murdoch, whose 21st Century Fox is part owner of the SVOD service, along with Disney and NBCUniversal among others. While Fox is committed to Hulu, it licenses content to the streaming provider only when it "makes the most sense" to do so, Murdoch said on a recent earnings call. Fox is also interested in distributing its content more widely, through apps and via other distributors besides Hulu.

"Read between the lines" Kafka wrote. "You can imagine a couple of different scenarios" that Murdoch might be considering, such as allowing only authenticated pay-TV subscribers to access Fox content on Hulu, or licensing its older content to the service only after it's appeared on Fox networks and TV Everywhere apps.

Like Kafka, others are skeptical. While Hulu probably wants a deal to happen so it can get its hands on Time Warner's vast content library, "Time Warner CEO Jeff Bewkes has another vision," said Motley Fool's Daniel B. Kline. Restating the company's reluctance to license its more recent content to competing services, Kline pointed to its strategy around HBO content and the eventual launch of HBO Now this year. "Time Warner waited a long time to sell HBO as a stand-alone that does not require a cable subscription to protect its other cable channels as well as the industry as a whole. That's not an altruistic gesture," he said.

Buying into Hulu "simply makes no sense for Time Warner," he said.

A BGR article was blunt about the effect a Time Warner buy into Hulu would have on the streaming service. In response to Re/code's speculation about changing Hulu's model to authenticating subscribers or licensing older content, "Both of these moves would be terrible for Hulu and would effectively kill its subscriber growth," said Brad Reed. "To tell subscribers that they would also have to pay for a pricey cable bundle in addition to what they're paying now would ruin Hulu's appeal."

For more:
- see this Re/code article
- see this WSJ article (sub. req.)
- see this Motley Fool article
- see this BGR article

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