(Corrects description of Providence Equity Partners in 10th paragraph to ‘private equity company’ from ‘hedge fund’)
By Ronald Grover and Jennifer Saba
LOS ANGELES/NEW YORK, March 25 (Reuters) - Hulu’s board has approached potential buyers to gauge their interest in buying the online video service, three sources close to the company told Reuters, as owners News Corp and Walt Disney weigh what to do with their interests in the five-year-old company.
The board sounded out several possible buyers as part of an internal strategic review begun recently, but it has not received a formal offer, one of the sources said on Monday, speaking on condition of anonymity because the discussions were private. It was unclear how many parties Hulu had contacted.
Hulu spokeswoman Elisa Schreiber and News Corp’s Nathaniel Brown declined to comment. Disney had no immediate comment.
News Corp and Disney are also considering other options, including buying each other out, one of the sources said on Monday on condition of anonymity.
Finding a buyer will be difficult because most of Hulu’s contracts with networks for programs are short term, according to Michael Pachter, an analyst with Wedbush Securities in Los Angeles who follows Hulu competitors Netflix and Coinstar.
“Nobody will buy them unless they can fix content costs in a long-term agreement,” said Pachter. “The value is based on the profit potential, and without certainty about costs no rational bidder will step up.”
The two media companies have for years pondered the direction of a service that now has more than 3 million subscribers to its premium service and last year generated revenue of about $700 million.
A third owner, NBC parent Comcast, gave up corporate control as a condition of buying NBC Universal.
The owners shopped Hulu before, rejecting bids in 2011. It also considered an initial public offering in 2010.
In October, Hulu paid private equity company Providence Equity Partners $200 million for its 10 percent stake in the venture. (Reporting by Ron Grover and Jennifer Saba)