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Disney Says Hulu Is Short on Cash: Deal Announcement on the Way?

by: Dan Rayburn April 04, 2009

With all the rumors lately about Disney (DIS) possibly cutting a deal with Hulu, various sources at Disney are talking to many on Wall Street about Hulu's financial situation saying the company is getting low on cash. While Providence Equity Partners, who put $100M into Hulu two years ago, is saying Hulu is not having any finance problems, I tend to believe Disney. No company who is ever running low on cash says they are, and their investors always tell you things are fine.

While $100M sounds like a lot of money, for a site the size of Hulu it's not unreasonable for them to have gone through the vast majority of that capital in the past 24 months. What investment NBC and FOX also put into Hulu is not known, but with Hulu's advertising revenue not yet covering their costs and their traffic skyrocketing, Hulu is clearly burning a lot of cash.

Hulu served over 300M streams in February and according to comScore, attracted 34.7 million viewers in the same month. Depending on who you ask, most agree that Hulu is only filling about 50% of its ad inventory which has not been helped by the downtown of online advertising in the current economy.

If Hulu truly is ruining low on cash as Disney says, then it puts Disney in the driver's seat with their negotiations with Hulu and probably gives them some leverage they may not have had a year ago. Whether or not this was Disney's tactic from day one is not known but it will be very interesting to hear more about the deal if it happens as I'm sure many details will be leaked. While those at the Cable Show are saying not to expect a deal in the next few days, the consensus amongst many is that a deal is expected to be announced shortly.

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Disney takes stake in Hulu and will stream shows to site

By David B. Wilkerson, MarketWatch

Last update: 12:21 p.m. EDT April 30, 2009

CHICAGO (MarketWatch) -- Walt Disney Co. has taken a stake in the increasingly popular streaming video Web site Hulu, and will make full-length episodes of such shows as "Lost," "Grey's Anatomy," and "Desperate Housewives" available for ad-supported viewing, the company said Thursday.

Disney joins NBC Universal (GEGeneral Electric Co) , News Corp. and Providence Equity Partners as a partner in the joint venture.

Financial terms were not disclosed. News Corp. is also the parent company of MarketWatch, the publisher of this report.

According to the latest report from comScore Video Metrix, the two-year-old Hulu became one of the top three U.S. video properties for the first time in March, with 380 million videos viewed.

Disney/ABC Television Group remains committed to its ABC.com video viewer, where it offers much of the same programming that will now be accessible at Hulu. The unit sees the two audiences as being distinct.

ComScore statistics show that only about 8% of the ABC.com audience goes to Hulu, while about 13% of Hulu's audience visits ABC.com. Disney/ABC takes the view that it can only be helped by reaching more of Hulu's viewer base.

Overall, with its initiatives to make shows available at iTunes, ABC.com and now Hulu, Disney/ABC has consistently held the position that letting more people sample its television programming will ultimately widen the TV viewing audience. In the past three years, TV viewing has increased, even as more shows have been streamed online.

"Disney has sought to meet the constantly evolving viewing habits of our consumers, and today's Hulu announcement is the next important step in that ongoing journey," said Bob Iger, chief executive of Disney, in a statement.

Disney shares were up 6.4% at $22.35.

As user-driven sites like YouTube began to galvanize the public's attention in recent years, frequently through pirated clips and full episodes of copyrighted materials, the studios and networks fought back.

Hulu, ABC.com, NBC.com and other sites of their kind sought to present high-quality user experiences that would not only undercut piracy, but present a more friendly environment for advertisers, who know their messages won't be fast-forwarded or surrounded by potentially objectionable items and comments posted by users.

Cable operators have expressed concern that consumers will eventually become so enamored on online viewing that they may decide to cancel cable service, and have discussed ways in which programmers could tie viewing of shows on the Web to a video subscription. The cable executives admit, however, that for now there is little evidence of so-called "cord-cutting" in the video realm.

David B. Wilkerson is a reporter for MarketWatch in Chicago.

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Walt Disney Co. has reached a deal to buy a nearly 30% stake in Web-video aggregator Hulu and put full episodes of its ABC TV shows on the site, according to people ...

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