Google Outmaneuvers Rival Hulu Bidders

The bids for Hulu are apparently all in and being mulled over by the company and its content partners. Four made the final cut, with three – Amazon, Yahoo, and the Dish Network – all hitting the $1.5 billion – $2 billion range for Hulu, Hulu Plus, and guaranteed rights to the content exclusively for two years. And then there is Google, which, according to AllThingsD, has rather more ambitious plans in mind.

What these ambitious plans actually are remains unclear, but sources are saying this is “a different acquisition, on a larger scale.” Which could mean a number of different things.

It isn’t even clear as to whether Google has entered a formal bid or has merely made a ballsy approach with an unwritten check in hand. Which may mean the whole process slows down from this point as Hulu decides what is in its best interests. Which may not be to take Google’s money, no matter how generous the offer.

YouTube + Hulu = Deadly Combination

The reason for this is that were Google to secure Hulu it would own a huge chunk of the online video sector. It already has YouTube, the most popular video destination on the Web, and adding Hulu and its longform content to its lineup would be a massive boon for the search giant.

Google knows that premium content is key, and that is where Hulu comes in. However, Hulu is owned (for the most part) by the same TV networks that are running scared of Google and its approach to offering up content for free and making money from advertising. Which could see them put a kibosh on any potential deal.

Can you imagine how powerful Google would become with both YouTube and Hulu under its wing? Too powerful for the networks, I’d suggest.

Conclusions

The Next Web predicts a Google/Hulu tie-up by Christmas, but I disagree. I think Hulu’s owners are more likely to take the safe option and sell to one of the other bidders. Unless, of course, these mysterious big plans are advantageous to the networks…

Netflix Heads South

Netflix may be losing access to Starz content but that isn’t waylaying the company’s plans to forage further afield for potential customers. With North America already sewn up, it’s now moving southwards in an effort to continue its surge onwards and upwards.

It was only the middle of July that Netflix announced this move into Latin America, Mexico, and the Caribbean, but six weeks on and the service is already being rolled out to the 43 countries and territories in that geographic locale.

Brazil is first, with the likes of Argentina, Uruguay, Chile, Columbia, and Mexico gaining access in the coming days. The price in each country differs, but is consistently between $7 and $10. U.S. customers now pay $7.99 for the streaming-only service.

Content Is Key

As Netflix expands internationally, content becomes an issue. It isn’t as though the world is a one size fits all empire whereby everyone watches the same content, so each territory is getting its own specialized set of content partners and genres.

Rochelle King, Netflix VP of User Experience and Design, said in a post on The Netflix Blog:

“Over the last few months, our team has spent countless hours in the region learning as much as we can about how Latin Americans think about, and enjoy, movies and TV shows. We’ve licensed thousands and thousands of hours of feature films, classic favorites, gripping telenovelas, documentaries and kids shows we know you’ll enjoy.”

Content is key, both in the U.S. and beyond. And as Netflix expands it’s going to find it harder to retain the partnerships it has been able to build to this point. Most partners will likely demand a massive amount of cash to keep the deals intact. Perhaps by expanding, Netflix is lessening the risk of being held at gunpoint by increasingly-antsy content providers.

Conclusions

The question now is where Netflix will head next. As a U.K. resident I’m hoping Europe is next on the agenda, as has already been rumored for the beginning of 2012. But Hulu tried and failed to establish a European base of operations and eventually headed to Japan instead. So I won’t hold my breath just yet.

Netflix Loses Starz

The month of September started badly for Netflix, as Starz Entertainment announced it was walking away from negotiations to renew its contract with the former DVD-by-mail company which sees its future wholly in streaming content to customers via the Internet.

The two companies were discussing a new deal to replace the current one which ends in February 2012. But in order to “protect the premium nature” of its brand Starz has decided to walk away from any potential deal and take its football (in this case a back catalog of movies) with it.

That can only mean one thing got in the way of a deal being forged: money. Which, as we know, makes the world go round. But it’s not as if Netflix wasn’t willing to pay Starz a hefty wedge of cash for its content.

Starz Loses Its Head

According to The L.A. Times, Netflix offered Starz a whopping $300 million-per-year to renew the existing contract. That is more than 10-times the amount the company has been paying since the deal was first struck in 2008.

Two things which have happened in that time are important to note: Netflix has grown in popularity, gaining subscribers every quarter; and it has added more and more content in that time. The former made Starz demand more money, the latter gave Netflix the confidence not to cave to its demands.

Netflix CEO Reed Hastings has stated that Starz represents around 8 percent of content viewed at the present time, and will likely hit around 5 percent by the time the deal concludes. Which means other content the company is currently pursuing will be able to fill the void left when Starz moves on.

Everyone Loses

The sad thing is that everybody loses here. Netflix loses a content partner, Starz loses a potential $300 million of annual revenue, and Netflix subscribers lose the opportunity to watch that content quickly and easily. And all because of greed.

[Via PR Newswire]

Hulu Expands

Hulu has rolled out its first international service in Japan just a few weeks after first announcing its plans to launch in the heart of Asia. But Japanese consumers are being asked to pay through the nose for the subscription service. And all before any Japanese broadcasters are even on board.

Hulu was expected to expand to Europe first but after having no luck in persuading U.K. broadcasters to supply content the company backed out. Japan and Australia were then targeted, and the former has been the first to debut. The latter still hasn’t been officially announced.

Content Vs. Price

Hulu in Japan is an entirely subscription-based affair, with the service costing ¥1,480 per month (around $19.19 U.S.). This is considerably more than the $7.99 charged in the U.S. for Hulu Plus, although it does mean adverts aren’t necessary.

For that price, Hulu Japanese viewers get a lot of American content from the likes of NBC, ABC, Fox, and Disney, and even CBS, which doesn’t offer content through the U.S. version. Movies such as Pirates of the Caribbean and Men In Black are available thanks to Sony Pictures and Warner Bros.

Content Vs. Sale

Strangely, Hulu has launched in Japan without any Japanese content. This is thought to be on the way, assuming the relevant deals can be forged between the company and Japanese broadcasters, but it does seem an odd omission at this stage of proceedings.

I can only assume the launch was somewhat rushed through in order to make Hulu more attractive to bidders looking to acquire the company. After all, the sale is still on, and the board are currently mulling over the offers on the table from the likes of Google, Yahoo, and Amazon.

Conclusions

It’s good to see Hulu Japan launching. Japanese consumers now have a premium online video streaming service to use, and the rest of the world can be more confident that Hulu will make it to other countries in the not-too-distant future too. Assuming the new owners have international expansion in mind.

Socialcam Startup

In the spring of 2011 Justin.tv launched a mobile sharing app that was designed to do for video what Instagram has done for photos. That being allowing smartphone users to share them with others across a range of platforms, social networks, and websites easily.

In the six months since the app made its debut it has become a major player in the market alongside the likes of BlipSnip, Viddy, and Vlix. So much so that Socialcam is being spun off from Justin.tv to be its own, independent entity housed in Founders Den in San Francisco.

Justin.tv co-founder and current CEO will be going with it and taking a small band of select engineers with him. Justin.tv will retain a stake in the new company, with additional funding and backers now being actively sought.

Ch-ch-ch-ch-Changes

Seibel is being replaced as CEO of Justin.tv by CTO Emmet Shear, who is charged with pushing TwitchTV (a live streaming video games portal launched in June) onto even greater things than it has already achieved.

I can only imagine TwitchTV will eventually be spun off into its own company as well. After all, 8 million viewers watching 1 billion minutes of video every month would suggest there’s a future for this endeavor. Which leaves me to question whether the original Justin.tv is being hung out to dry?

So What About Justin.tv?

Justin.tv is one of a number of live streaming video companies which offer people the chance to effectively broadcast online as if they owned their own TV station. But it’s a market that seems to have reached a certain point and remained there, slowly flatlining.

While it’s still a popular destination, there is clearly some effort by the Justin.tv execs to move into other territories rather than risk losing momentum to the point at which they do a Joost. Because no one wants that kind of memorial.

[Via TechCrunch]

Walmart Takes On Vudu

Walmart acquired Vudu early in 2010 after previously trying and failing to launch its own movie and TV download offering. In a deal thought to be worth around $100 million Vudu became a subsidiary of the U.S.-based uber-retailer.

Around a year later Walmart pushed Vudu to the browser for the first time, complementing its availability across a huge range of Internet-connected devices (more than 300 at last count).

At the end of July Vudu was integrated into the main Walmart website in a big, bad way in an attempt to make it more mainstream. All of which appears to have paid off massively. So much so that Vudu can now be considered a big player.

Market Share Increase

According to IHS Screen Digest Research, Vudu’s market share under Walmart’s ownership has increased substantially, rising from one percent in the first half of 2010 to 5.3 percent in the first half of 2011. This has seen it jump above both Amazon on 4.2 percent and the Playstation Store on 4.4 percent.

No surprise which company and service is at number one, and by quite a margin. Apple iTunes currently has a 65.8 percent market share, and that only seems to be increasing. More surprising, possibly, is Microsoft’s Zune video marketplace at number two with a 16.2 percent market share, although now seems to be dwindling.

Conclusions

This is great news for Walmart, a bricks-and-mortar business which has struggled to make the transition to the Web. Vudu represents a huge success in this regard. I wonder how many of its new-found customers have sought alternatives after Netflix upped its prices?

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Google TV Coming To U.K.

Google TV may not have been a success in the U.S., with Apple TV outperforming it every step of the way, but that isn’t stopping Google from planning its next move. And it’s one that will see them hop across the Atlantic to arrive on the doorsteps of the British public.

According to Eric Schmidt, speaking in his keynote at the Edinburgh Television Festival, Google TV will launch in Europe in the next six months, and the search and advertising giant is already in talks with British broadcasters.

This is a necessary step if Google is going to avoid experiencing the same problems in the U.K. and Europe as it has in the United States. The major U.S. networks have all blocked their content from streaming through Google TV, proving their desire to remain in control but also their unwillingness to stare the future in the face.

Google TV Future…

Google, however, is looking to the future, and Schmidt claims that early failure (as perceived from the outside) will now prevent the company from moving forward with its plans. According to Reuters, he is confident that more partners will join the existing ones, saying:

“We’re absolutely committed to staying, to improving Google TV. I believe that they’re both [Sony and Logitech] going to be on board and I believe there are many more coming. Wait shortly for an announcement.”

The message is clear: Google isn’t going to kill Google TV off anytime soon. In the same way that Apple is viewing Apple TV as a hobby for the time being, knowing that its day will surely come, so Google is confident that connected-TV platforms are the future, and it needs to be involved.

Conclusions

There is a longterm battle shaping up here, not only between Google and Apple, but also between dozens of other smaller players all building their own connected-TV platforms. We won’t know who is going to win until the TV networks start playing nice, but Google is clearly not going down without a fight.

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99-Cent TV Shows

Last year saw Apple aggressively pushing for television studios to offer the latest episodes of their biggest shows for rental through iTunes for the low price of just 99-cents. Steve Jobs, who has now resigned as CEO of the company, thought price would be the key in persuading people to rent rather than buy.

Unfortunately there were few takers. Of the big four networks only Fox and ABC were on board, with CBS and NBC opting out. Time Warner was vehemently against the idea of offering content so cheaply.

It seems consumers didn’t really take to the idea either. Then again, if the content had been there in the first place then perhaps things would have turned out differently.

Rental Option Disappears

The option to rent TV shows has now disappeared from iTunes, although movies are still on offer. The experiment lasted around a year but Apple and its content partners clearly felt it hadn’t had the impact they were all hoping it would. Consequently, it is no longer an option.

Apple spokesman Tom Neumayr told AllThingsD:

“iTunes customers have shown they overwhelmingly prefer buying TV shows. iTunes in the Cloud lets customers download and watch their past TV purchases from their iOS devices, Apple TV, Mac or PC allowing them to enjoy their programming whenever and however they choose.”

As suggested, this is likely a result of iTunes Replay, or iTunes in the Cloud, which lets you watch content you previously purchased on any iOS device as well as Apple TV, Mac, and PC. Why bother renting when you can buy and continue to watch time and again across a range of products?

Conclusions

I can’t help feeling this was a missed opportunity, but by who I’m not sure. Perhaps the time of rentals is over, as we all now either want to own content outright or pay a monthly subscription fee to access it on demand as and when we want to. Which is surely Apple’s next trick.

[Via AppleInsider]

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Hulu Bids Incoming

The deadline for bidders to submit the figure they are willing to pay to acquire Hulu has reportedly been extended from until the end of the week. This is to allow potential buyers more time to study the financials of the company to ensure they stack up against the considerable asking price.

Hulu is looking for bids in the region of $2 billion, which would seem excessive when revenue has only just hit $500 million for the year and profitability is still some way off. There are also other questions being asked by those in the know, especially related to the longterm future of the business.

Future Failings

Hulu is nothing without content. Yes, it’s a well-known brand with millions of users in the U.S., 1 million of which have deemed the service good enough to pay the subscription fee required to receive Hulu Plus. But content is still king.

For Hulu the content all comes from the big media companies, and there are deals in place with the likes of CBS and NBC. But these aren’t deals that will run for ever, and in fact some are due to expire in just one year’s time. Even the longest is for less than five years.

When these do come to an end they will have to be renegotiated, and media companies have a tendency to display greed at these moments as they realize there is good money to be made in an online service that is actually working.

The new owner, whoever that may be, will have to be strong in order not to be bullied into signing one-sided deals. Unfortunately the content providers hold all the cards in such situations. Because they can, if they want, just threaten to walk away and take their ball content with them.

Conclusions

Whoever takes Hulu on is going to face some pretty serious challenges. But if they navigate these successfully then there is a good chance they’ll have bought wisely.

This element of risk does, however, increase the likelihood that a big player will be the eventual buyer, as the likes of Google and Amazon can afford to lose a couple of billion dollars. In the same way we don’t sweat losing $1 down the back of the sofa.

[Via Reuters]

Amazon Bidding For Hulu?

Hulu is up for sale, although most people don’t understand why its owners, Walt Disney, News Corp, NBC Universal, and Providence Equity Partners, want to sell what has so far been a successful venture and one that stands on the cusp of greatness as the online video sector grows ever larger.

Some companies, such as Microsoft, have fallen out of the running, but the likes of Google, Yahoo, and DirecTV are still in. Also rumored are Apple and a new contender in the form of online retailer Amazon.

Amazon stands to gain a lot from acquiring Hulu. It would add content to its Prime subscription service and be a great selling feature were the company to release an Android tablet designed to compete with the Apple iPad in the near future. Which is pretty much guaranteed at this point.

Whoever grabs Hulu looks set to pay somewhere in the region of $1 billion to $2 billion. Which is a huge sum of money, granted, but still doesn’t justify the sale in the first place. And it isn’t just laymen such as myself who think so.

Why Sell???

BTIG analyst Richard Greenfield has argued the case for its current owners to hold on to Hulu and questioned why they are even considering selling at such an early stage. In a recent blog post [via The Hollywood Reporter] he argues:

“We find it very hard to fathom why any media company would want to give up ownership of such a unique asset at such an early stage of growth. Hulu appears to be the perfect weapon for networks/content creators to embrace so they can grow revenues and profits, even if the current multichannel ecosystem becomes unglued over the next decade.”

“Media companies should be going out of their way to retain ownership of Hulu and allow it to flourish. The bigger Hulu gets, the more dollars it can pay content creators on an annual basis. While that may be true if it is owned by a third-party as well, being invested in Hulu and sacrificing near-term profits for long-term value creation appears far too compelling.”

It does appear as though the current owners are seeking short-term gains while completely missing the opportunity Hulu offers them in the long-term.

News Corp. has actually indicated it may retain its stake in the company, but the others all seem to want to get out while the going is good. Which makes no sense whatsoever for a growing entity such as Hulu.

Conclusions

I’ve struggled to understand why the current owners of Hulu would want to sell at this stage, but they seem intent on doing so for whatever fatuous reason. Their loss is going to someone else’s gain, and I wouldn’t bet against Amazon emerging victorious in this colossal auction.