Online video streaming company Hulu has attracted yet another
bidder. This time,
) and Chernin Group have submitted a $1 billion bid for the
Owned by Peter Chernin, a co-founder of Hulu, Chernin group
had initially submitted a $500 million bid for the company.
However, AT&T, which itself is looking to introduce its
over-the-top (OTT) offering reinforced the company to submit a
AT&T-Chernin Group and
) are now believed to be the strong contenders for Hulu. In Jun
2013, DIRECTV, the largest satellite-TV operator in the U.S.,
offered $1 billion to acquire the online streaming company.
Since DIRECTV's initial bid for Hulu, the company has received
a bid from
Time Warner Cable Inc.
) and a joint bid from Guggenheim Digital and private equity
Kohlberg Kravis Roberts & Co. L.P.
). Guggenheim and KKR have since been eliminated from the bidding
process. Time Warner Cable, on the other hand, wants to become a
stake holder in Hulu. The owners could consider this as an
Hulu wants a buyer keen on investing in programming and
maintaining its growth momentum. The company boasts a strong
subscriber base of more than 4 million and has generated $700
million revenues last year through advertising and monthly
The U.S. pay-TV market is extremely competitive. In addition
to the traditional cable TV and satellite TV operators, telecom
giants are also offering fiber-based high-speed video services.
In contrast, low-cost online video streaming services have also
become very popular, especially when the economy is still reeling
In order to survive, traditional pay-TV operators are
diversifying in related fields. AT&T's major rival,
), has invested in Redbox Instant, while
) acquired content developer, NBC Universal, and has deployed
online video streaming service, Streampix.
AT&T's total U-verse TV subscribers reached 4.8 million at
the end of the first quarter of 2013 with a net addition of
731,000 high-speed Internet users. However, growing saturation in
the U.S. pay-TV market and increased competition from video
streaming companies is affecting AT&T's market share.
We believe that acquiring Hulu will be profitable for
AT&T, as it will be able to counter competition from other
OTT companies like
) and YouTube. However, it has to be seen how things will shape
up for AT&T's Hulu bid.
Currently, AT&T carries a Zacks Rank #3 (Hold).
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