The case for holding on to Hulu

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As the owners of Hulu prepare to receive initial bids Wednesday, at least one Wall Street analyst argues that it would be ‘a mistake of epic proportions’ to dispose of the Internet television pioneer just as the service is gaining momentum.

Richard Greenfield, a media analyst with BTIG, notes that since its public launch in March 2008, Hulu is on pace to collect $500 million in revenue this year -- nearly double its 2011 take. Hulu’s nearly 25 million viewers in July spent, on average, more than three hours a month watching shows. And the service delivered the highest number of online video ad impressions, according to the measurement firm ComScore.

‘Media companies should be going out of their way to retain ownership of Hulu and allow it to flourish,’ Greenfield wrote, referring to Hulu partners News Corp., Walt Disney Co. and NBCUniversal parent Comcast Corp. ‘The bigger Hulu gets, the more dollars it can pay content creators on an annual basis.’

Companies including Amazon.com, DirecTV, Google Inc. and Yahoo Inc. are expected to submit offers for Hulu, which could go as high as $2 billion, according to people familiar with the matter.

Earlier this month, News Corp. Chief Operating Officer Chase Carey cautioned that a sale was not a foregone conclusion. He told investors on the Aug. 10 earnings call that details were still being sorted out.

‘We’ll see where it ultimately ends up,’ Carey said. ‘In the end ... does it make sense for us to stay in an ownership position and continue to have it driven by content owners?’

The service’s corporate parents are determining whether to grant exclusive online rights to the prospective new owners -- and for what duration.

Hulu’s media owners have long struggled with the service’s success, which some see as threatening established business relationships with cable, satellite and telecommunications companies. These distributors have balked at paying for popular prime-time shows that Hulu has made available online for free a scant 24 hours after an episode’s initial airing.

Greenfield wrote that the move toward so-called ‘authentication,’ in which only cable and satellite subscribers get immediate online access to current shows, ‘solves that problem for very recent content.’

Fox last month imposed an eight-day waiting period for free online access to ‘Glee’ and other popular shows. Only those who pay -- which for the moment are DISH subscribers -- can watch these programs online within 24 hours.

Disney Chief Executive Robert A. Iger hinted that ABC might soon follow Fox’s lead during the company’s recent earnings call. He said Disney would consider some form of authentication to ‘allow access to our programming faster or in a more aggressive window, if the customer is a multichannel subscriber.”

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-- Dawn C. Chmielewski