Broadband Cable Association of Pennsylvania


October 14, 2011

Owners of online-video site Hulu LLC ended efforts to sell the joint venture, after an auction process exposed rifts between them and potential buyers on the value of future rights to stream television shows over the Internet.

The decision, which came in a joint announcement late Thursday, draws to a close an auction process that began in June, after Hulu received an unsolicited offer to buy the venture. Hulu is owned by News Corp., parent of Fox Broadcasting Co., Walt Disney Co., owner of ABC network, and Comcast Corp.'s NBCUniversal, Providence Equity Partners and Hulu employees. News Corp. also owns The Wall Street Journal.

Hulu has been a bellwether for Internet video since News Corp. and NBCUniversal created it more than three years ago. Stocked with many of their new shows, available free with ads, it rose to become one of the most popular online-video destinations. But in recent years, its media owners have become more reluctant to give their content away for free, with some executives arguing the site was a headache that could undermine the traditional TV business. Abandonment of the sales process reflects in part a change of heart. Now, at least some of the media owners have come to see more strategic value in holding onto Hulu, and using to to shape the online-video landscape, according to people familiar with their thinking.

"Since Hulu holds a unique and compelling strategic value to each of its owners, we have terminated the sales process and look forward to working together to continue mapping out its path to even greater success," the owners said in a joint statement Thursday evening. "Our focus no rests solely on ensuring that our efforts as owners contribute in a meaningful way to the exciting future that lies ahead for Hulu." Companies which had considered bidding for Hulu included Google Inc., Dish Network Corp., Inc. and Yahoo Inc., according to people familiar with the situation.

One of the biggest sticking points in the auction process was over Hulu's package of rights to distribute TV programs from Fox, ABC and NBC. At least some bidders had wanted longer or otherwise more expansive rights deals to shows like "Modern Family" than the owners had been willing to grant as part of a purchase, according to people familiar with the talks. Some of these people said owners had balked at those terms.

Yahoo, whose initial expression of interest kicked off Hulu's exploration of a sale, dropped out of the bidding recently, people familiar with the matter said. Yahoo is in the midst of its own strategic review. The end of the auction may only delay a shakeout in Hulu's ownership. Providence Equity still holds a put right to be bought out of the venture in about a year, according to a person familiar with the matter. The end of the sale process could also lead to conversations with Hulu Chief Executive Jason Kilar about buying him and other senior management with ownership stakes out of the company, the person said. Mr. Kilar and owners have clashed over some strategic decisions at the venture in recent years, including the amount of new TV content that should be available free on the site. A spokeswoman for Hulu declined to comment. Wall Street Journal

Federal Communications Commission officials asked AT&T Inc. for more information Thursday about the company's claims that its proposed $39 billion acquisition of T-Mobile USA would create between 55,000 and 96,000 jobs. In a letter to AT&T's lawyers, FCC wireless bureau chief Rick Kaplan asked AT&T to answer the commission's May request for data about AT&T's jobs claims. Saying that AT&T "has produced almost nothing" in response to the FCC's previous question about jobs data, Mr. Kaplan asked the company to provide more details by Oct. 31.

AT&T, in a letter filed Thursday with the FCC, said its filings with the agency made it clear "that although some jobs serving redundant functions would be eliminated to reduce costs, AT&T will rely primarily on natural attrition-employees retiring, taking other jobs, etc.-to accomplish those reductions." Data requests from the FCC aren't unusual in deals like this. However, the request suggests that the agency is looking carefully at AT&T's claim that the transaction will create jobs instead of eliminate them, which is a common result of such mergers.

AT&T's deal with Deutsche Telekom AG, owner of T-Mobile USA, already has received government scrutiny. The merger hit a wall in August when the Justice Department sued to block it, citing the potential for harm to consumers. FCC Chairman Julius Genachowski said at the time that the buyout raised "serious concerns" about the effects on competition. The FCC had asked AT&T for details including "all plans, analyses and reports discussing the creation or loss of jobs" if the deal were to go through. In the letter Thursday, the FCC repeated the request but also asked for all documents created in the past five years "that analyze or describe AT&T's strategy or policies with respect to the location of call center jobs." The agency also asked for data about the "estimated cost synergies" that could come from possible payroll reductions or other job-related savings.

AT&T has argued the T-Mobile acquisition and its commitment to spend more than $8 billion on its combined network would result in the gain of upward of 96,000 U.S. jobs. The company announced plans to return 5,000 T-Mobile call-center jobs to the U.S. from overseas on the same August morning in which the Justice Department announced plans to file a lawsuit to block the $39 billion deal. The Dallas-based carrier also told the FCC it made "significant job commitments," such as job-offer guarantees to certain T-Mobile employees and a promise to retain the two companies' U.S. call-center employees. A spokesman for AT&T said the company will respond more specifically to the FCC's latest request.

While AT&T and Justice Department lawyers prepare for a court case about the proposed deal, FCC officials are continuing their review of the transaction. Agency officials haven't provided any indication yet of when their review might be completed. Shares in AT&T rose 11 cents to $29.10 at 4 p.m. in composite trading on the New York Stock Exchange. Wall Street Journal

President Obama's re-election campaign is gearing up in Pennsylvania, a crucial state that he carried in 2008 and that is central to his strategy to win in 2012. Supporters are invited to celebrate the opening of the state headquarters Thursday in Center City at an open house from 5 to 8 p.m. On the bill: musical entertainment, state Sen. Anthony Williams (D.,Phila.) and senior Obama for America officials, who will describe the campaign's plans for Pennsyvlania. The address is 42 S. 15th Street, and the office is on the 16th floor.