Providence Equity Partners owns 10 percent of the joint venture in exchange for an early $100 million investment; NBC Universal (NYSE: GE) and News Corp each own 45 percent. One plan, according to one source, is for Disney to get something close to parity with the media companies, possibly with performance incentives. But it is difficult to see NBCU and News Corp agreeing to parity—a healthy stake, yes, but the others are likely to want their first-in status to equal larger shares than those coming in now.
The deal sounds similar to variations I was told were discussed with CBS (NYSE: CBS). Instead, Hulu wound up yanking its programming off CBS Interactive's TV.com, which signed a distribution deal before parent CNET was acquired by CBS, over contractual issues. The result: gaping holes in the programming for Hulu and TV.com. Disney has stayed away, though, focusing primarily on delivering its broadband programming through its own players on its own sites.
But would serious equity be enough or would Disney insist that NBCU and News Corp (NYSE: NWS). extend their commitments to Hulu for NBC, Fox and various cable nets beyond the remaining year? The exclusivity makes Hulu the only conduit for PC-based distribution; as is the case with NBC and Fox, ABC still would be able to distribute its content through its own players on its own sites. That kind of assurance from NBCU and News Corp. would seem even more important given a variety of issues, including the pending departure of Hulu board member Peter Chernin, who played a key role in making the JV happen as COO of News Corp., and the pressure from cable operators like Comcast (a Hulu distribution partner through its Fancast portal) to fold in online access to broadcast and cable programming with cable subscriptions. Disney also could agree to a non-exclusive deal, which means it would keep the rights to co-distribute its content—but that would put a significant equity stake in doubt.
Why now? One source says, "Hulu has more scale (than the networks), which is why I think they're back at the table." Hulu.com recently celebrated the first anniversary of leaving beta and is in the midst of a national branding campaign that started during the Super Bowl with an ad featuring 30 Rock's Alec Baldwin. Stats released this week by comScore (NSDQ: SCOR) Video Metrix showed Hulu with a 33 percent increase in viewed videos following the ad. Hulu delivered 333 million videos in February, ranking fourth in U.S. video properties with 2.5 percent. Hulu's share is small compared to YouTube but not compared to the standalone networks. In the same comScore report for February, Viacom (NYSE: VIA) Digital Network accounted for 1.9 percent of videos delivered, with Disney Online and CBS Interactive each just under 1 percent.