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A Hulu Deal Never Made Sense Anyway

NEW YORK (TheStreet) -- After a fairly length process over many weeks, Hulu is not going to be sold, its owners said Friday, calling off the bidding process. Given the structure, cost and resources used to continue furthering the site, a deal never made sense to me.

Twenty-First Century Fox (FOX), Walt Disney (DIS) and NBCUniversal, a division of Comcast (CMCSA), decided to call off the bidding for Hulu, and will continue to maintain their ownership percentages in the site. The companies also announced they will provide Hulu with $750 million in cash to continue building it out.

"We believe the best path forward for Hulu is a meaningful recapitalization that will further accelerate its growth under the current ownership structure," said Chase Carey, President and Chief Operating Officer of 21st Century Fox. "We had meaningful conversations with a number of potential partners and buyers, each with impressive plans and offers to match, but with 21st Century Fox and Disney fully aligned in our collective vision and goals for the business, we decided to continue to empower the Hulu team, in this fashion, to continue the incredible momentum they've built over the last few years."

The issue with a sale of Hulu was, and always has been, who actually owns the content and what the licenses will be if the company changes hands. Given the unique ownership structure of the company, any of the potential bidders (The Chernin Group), AT&T (T), DirectTV (DTV) and others) would've had to pay not only for the company itself, but then sign long-term, expensive content deals with the former owners to keep the content coming. It would've made a potential $1 billion acquisition into more like $1 billion plus several additional billion dollars in content costs.

This isn't the first auction to fail for Hulu either. The company was put on the block two years ago as potential buyers continued to worry about the content costs and if they would be able to retain access to the TV programming on the site.

Hulu, which has more than 4 million subscribers, and generated $690 million in revenue in 2012, is worth something to the right partner. Perhaps that partner is the same basket of companies who own it now, as it would become too big of a liability for any of the aforementioned bidders. I thought it was very telling that The Chernin Group reportedly only bid $500 million for Hulu, despite Peter Chernin, Chairman and CEO of The Chernin Group, having intimate knowledge of the company.

Content owners realize that content is king, and people are consuming more and more of it. The bidders may have ultimately realized a deal would be too expensive for any one company to handle, given the fact Hulu gets its content from three sources, not one.

For now, Hulu will continue to remain under the same ownership group as before, and nothing will change.

Until the next auction for the company comes around.

--Written by Chris Ciaccia in New York

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