Peter Kafka

Recent Posts by Peter Kafka

Disney’s Decision: Hulu, YouTube or Something Else?


For weeks now, I’ve been hearing chatter that Disney was close to doing a distribution deal with Hulu. Disney would give Hulu exclusive access to at least some of its online video in exchange for an equity stake alongside GE’s (GE) NBC and News Corp.’s (NWS) Fox. And accompanying said chatter was this refrain: Why?

The puzzlement comes from video players who don’t work at NBC, Fox or Hulu, and who can’t see the upside in Disney CEO Bob Iger throwing in his lot with Hulu.

After all, the argument goes, Hulu videos are popular, but the site makes little if any money, and it’s unclear how much the equity stake in the joint venture would ever be worth. When Providence Equity Partners kicked in $100 million for a 10 percent stake in 2007, it valued the company at $1 billion. I’m sure a charismatic banker could argue that it’s worth more now, even in the midst of a recession. But no matter what the valuation is, Disney’s portion would still be illiquid, and present tense cash counts for a lot these days.

Just as important, an exclusive deal with Hulu would be sure to anger Disney’s current and future partners, who range from cable giant Comcast (CMCSA) to Google (GOOG), and who either already pay Disney large sums of money or might be able to do so. So what is Iger thinking?

Now comes the answer: He’s playing the field.

PaidContent reports that at the same time Disney is talking about a tie-up with Hulu, it is also talking about a deal to stream full episodes of its shows on Google’s YouTube (GOOG). (Staci Kramer also says Disney is close to doing a deal to put Disney clips on YouTube, but that’s much less important).

There isn’t much in the way of detail in the report, but the gist is clear: Iger is putting Disney’s video assets in play. Who wants to step up?

I’m told that executives from Google, Comcast and CBS (CBS), have all tried to convince Iger–either directly or through intermediaries–not to lock up exclusively with Hulu. Now it’s time to for them to offer a compelling alternative.

Comcast, for instance, already pays Disney a huge sum for the right to show ESPN and other cable programming. And it also wants Disney to offer its stuff through the cable giant’s Fancast video portal. How much is it willing to give up for that?

As Staci points out, this is big turn from the walled-garden approach Disney/ABC has taken in the past couple years: Right now, if you want to watch, say, “Lost” on the Web (legally), you pretty much have to watch it at

The fact that Iger seems to have moved on from this approach and is willing to port his stuff to Hulu, YouTube or anywhere else, doesn’t bode well for Albert Cheng, the Disney digital executive who championed that strategy.

Happy coincidence: Iger will be speaking at the cable industry’s annual convention in Washington, D.C. on Thursday. This is guaranteed to be topic A.

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— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google