Hulu TV: Why I'm hoping Google buys the online TV site.

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June 23 2011 5:36 PM

Goolu

Why Google should buy Hulu.

Hulu. Click image to expand.
Hulu

Who should own Hulu? This has long been a parlor game in Hollywood and Silicon Valley, where the online TV site has always been perceived as the offspring of two contradictory cultures. Since its launch in 2007, Hulu has won millions of viewers—and is supposedly on track to earn $500 million in sales this year —by offering an attractive, user-friendly way to watch the most popular shows on TV. But its start-up ethos has run up against the wishes of its owners—News Corp., Walt Disney, and Comcast—who see Hulu as a threat to their main sources of revenue: ads and monthly subscription fees on broadcast and cable television.

In the last few years, those owners (who are also the site's main licensors of TV shows) pushed for Hulu to run more ads and to launch a subscription version, Hulu Plus. The negotiations about these restrictions have been tense. Last year, Hulu CEO Jason Kilar threatened to quit when executives rejected his plan to offer Hulu Plus for $5 a month rather than $10. That time, the two sides managed to compromise: Hulu Plus now sells for $8 a month. But Hulu, which has to fend off attacks on its business model from pretty much every giant in the tech industry, will never survive long-term if its plans are always getting second-guessed by hyper-cautious higher-ups.

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Fortunately, both Hulu and its benefactors seem to have realized that their marriage is doomed. News broke this week that the company has hired a couple of investment bankers to begin putting together a sale of the firm. The question, now, is who would make the best use of its assets.

Early reports say that Yahoo has submitted an informal bid, but I'm guessing that Kilar and his team will politely decline. Yahoo has ruined every start-up it's ever acquired; for Hulu, being owned by Yahoo would be the only option worse than the status quo. If Steve Jobs or Jeff Bezos come calling, I'd advise Kilar to turn them down, too. Yes, both Apple and Amazon have a formidable presence in the digital entertainment business, but neither has any expertise when it comes to the largest source of Hulu's revenue: free, ad-supported videos. (Apple would surely want its content to be restricted to its proprietary platforms, which would be a disaster for Hulu.) Then, of course, there's Netflix. Last year, I floated the idea that Netflix should buy Hulu, and while I still think that would be a good combination—Netflix's already fantastic subscription plan would be even better if it offered access to Hulu's lineup of current-run TV shows—the window for such a deal may have passed. Netflix's subscriber numbers and profits are soaring. It doesn't really need to spend a fortune on Hulu.

So who's left? Hulu's best option, and the one that could turn the service into a blockbuster, is Google.

I'm hoping that the search giant is aggressively pursuing Hulu and that Hulu and its owners are smart enough to realize that this is a can't-lose matchup. Google has lots of money to spend on Hulu, and it has a clear spot in its product lineup for it, too. Google's YouTube subsidiary is finally on the verge of turning a profit, but it has long wanted YouTube to be more than just a place for viral videos. The company has been pushing to produce more professional content in an effort to turn YouTube into a rival to TV. Buying Hulu and its portfolio of licensed shows would jump-start that process. And Hulu would help Google beyond YouTube, providing a much-needed source of content for Android phones and tablets as well as Google TV.

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