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Comcast has to sit on its hands while Hulu drama plays out

June 24, 2011 |  2:11 pm

Imagine owning a big chunk of a company and having no say in its operations or future.

That's the position Comcast Corp. finds itself in with regard to Hulu, the online video site that consists primarily of content from its owners who, besides the cable giant, include News Corp. and Walt Disney Co. Hulu recently retained investment bankers to pursue a possible sale and Comcast has to sit on the sidelines while this drama plays out even though the end result could greatly affect it.

Comcast ended up with a piece of Hulu when it acquired majority control of NBCUniversal from General Electric Co. At the time, there was great concern about what Comcast's acquisition of NBC would mean for the future of Hulu. Many consumer advocates, lawmakers and media watchdogs feared that Comcast would view Hulu as a competitor to its own cable distribution platforms and try to squash it.

Indeed, in the consent decree approving the deal, the government said, "Comcast has an incentive to prevent Hulu from becoming an even more attractive avenue for viewing video programming because Hulu would then exert increased competitive pressure on Comcast's cable business."

When it signed off on the deal, the government essentially told Comcast that it could retain its stake in Hulu but also had to give up its voting rights and board representation. As part of the approval order, Comcast was also ordered to provide programming to Hulu on the same terms as the other owners. Earlier this week, News Corp. was near a renewal deal for its content with Hulu and Disney is now following suit. Comcast will also now do the same per its deal with the government.

Since its hands are tied, Comcast will have little say in any sale of Hulu, and yet could find itself having to go along with a deal that could put the website in the hands of a potential competitor. While News Corp. and Disney do not own cable systems or have broadband operations, Comcast does, and it is likely to be wary about Hulu ending up in the hands of a company such as Google or Yahoo, especially if it has to provide content to a rival.

Whoever buys Hulu probably would insist on having long-term programming commitments from the current owners. Otherwise it would be akin to buying McDonald's without getting the French fry recipe. Comcast would presumably have to sign such an accord as well, since part of the consent decree also prohibits it from using "restrictive contract terms to harm the development" of online video distributors such as Hulu.

-- Joe Flint

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