June 6, 2013
AT&T Inc. is in talks with the Chernin Group to join forces on a bid for Hulu, say people familiar with the situation, potentially adding another deep-pocketed company into the mix of suitors for the online video site. The Chernin group, which is run by former News Corp. president Peter Chernin, submitted a bid earlier in the process that Hulu's owners considered a lowball offer, a person familiar with the matter said. Teaming up with AT&T could make Mr. Chernin a more competitive player in the auction.
Among companies he is bidding against is DirecTV, which has made an offer valued at more than $1 billion, including the assumption of Hulu debt, says a person familiar with the situation. DirecTV declined to comment. Other bidders include Time Warner Cable, Yahoo Inc. and financial investors, as previously reported. For pay-TV operators, Hulu holds the potential to be a nationally branded platform for so-called TV Everywhere, the industry term for services under which programming is made available on computers, tablets and smartphones to pay-TV subscribers. AT&T has already taken a step into the video-streaming business with the launch early this year of "U-Verse Screen Pack," a $5 per month add-on for its U-Verse television subscribers. The service offers hundreds of mostly older movies. Its telecom industry rival, Verizon Communications Inc., also has entered the fray through RedBox Instant, a joint venture with Coinstar Inc. that has rolled out an $8 per month streaming video and DVD-rental service.
Hulu is owned by three major media companies: Fox parent News Corp., ABC parent Walt Disney Co. and NBC parent Comcast Corp. (For regulatory reasons, Comcast can't vote its stake.) The site was founded in 2007 to allow major broadcast networks to deliver their TV programming online. It offers a catalog of more than 70,000 full TV episodes, including the current seasons of hit shows. News Corp. also owns Dow Jones & Co., publisher of the The Wall Street Journal. Mr. Chernin ran News Corp. when Hulu was launched in 2007. Since leaving News Corp in 2009, he has started an investment group that has put money into media, technology and entertainment properties around the world. His backers include Providence Equity partners, which for a time also had a stake in Hulu.
Much of Hulu's value is in the popular network programming its owners license to the company. The price bidders are willing to pay depends, in part, on how long the owners are willing to keep licensing that content. Bidders are pushing for licensing deals lasting a minimum of two years but ideally longer, a person familiar with the situation said. Earlier this year Disney and News Corp. put Hulu on the market, after months of debate about the right strategic direction for the site. There's no guarantee the companies will sell. In 2011 a similar auction didn't lead to a sale. The Web site AllThingsD earlier reported the AT&T talks with Chernin Group. Wall Street Journal
Time Warner Inc. said Thursday it has forged a partnership with a Chinese investment fund to pursue opportunities in the country's growing media and entertainment sector. Time Warner is investing about $50 million in the fund, China Media Capital, according to a person familiar with the matter. The company hopes to target mainly television and film content businesses, the person said. "Increasing our global presence is one of Time Warner's strategic priorities and China is one of the most attractive territories in which we operate, but it is complex," said Time Warner Chairman and Chief Executive Jeff Bewkes. "This alliance will give all our businesses a savvy and accomplished partner."
Navigating the Chinese market has proved tricky for foreign media companies. Time Warner, whose businesses include the Warner Bros. film and TV studio, Turner Broadcasting family of cable networks and premium cable channel HBO, used to operate movie theaters in the country through a joint venture with a local partner. But it pulled out of that venture in 2006 after China tightened foreign ownership restrictions. China's growth potential remains attractive. The Chinese filmed-entertainment sector will be worth $6.49 billion in 2017, up from $3.26 billion in 2012, according to PricewaterhouseCoopers. China is the largest pay-TV market in the world already with 223 million subscription TV households. Growth is expected to continue, PwC says: Pay-TV subscription revenue is estimated to rise from $9.45 billion in 2012 to $17.84 billion in 2017. China Media Capital is a media- and entertainment-focused investment fund founded in 2010 by its chairman, Ruigang Li. The firm has participated in several investments and transactions, including DreamWorks Animation SKG Inc.'s Chinese joint venture. It also acquired a controlling stake in Star China's TV business from News Corp. (News Corp. owns Dow Jones & Co., publisher of The Wall Street Journal.)
Foreign media companies are increasingly chasing growth potential overseas. That is especially true in the pay-TV business, which in the U.S. is virtually saturated but is still growing rapidly in other parts of the world. Time Warner has a variety of other operations abroad. Several of its cable properties including HBO, Cartoon Network, TNT, and CNN have a presence in Europe, Asia and Latin America. HBO- and Cinemax-branded services are distributed in more than 60 countries. The going isn't always easy. Last year, Time Warner shut down its general entertainment network in India, Imagine, and its TNT television operations in Turkey, citing a failure to meet growth objectives. Wall Street Journal
Google Inc.'s Motorola unit confirmed that it has reached an agreement to settle patent litigation with set-top box maker TiVo Inc. The terms of the settlement weren't immediately disclosed, but the agreement marks another end to TiVo's continuing patent litigation efforts with its larger rivals. TiVo, based in Alviso, Calif., popularized TV-connected digital-video-recording devices. It has been largely successful in its protracted legal battles against larger rivals it said are making competing devices that infringe its patents. Two years ago, for example, Dish Network Corp. and its former unit EchoStar Corp. agreed to pay TiVo $500 million to settle their seven-year patent dispute. In January 2012, the company also got at least $215 million as part of a settlement with AT&T Inc.
The patents TiVo initially sued Motorola over included technology encompassing a digital video recording and playback device and methods for more efficiently playing recorded video. A spokesman for TiVo declined to comment about the case, as did two of the clerks for the U.S. District Court for the Eastern District of Texas, where the case was being heard. No settlement papers had appeared by Thursday afternoon in files for the case that have been made public online. TiVo's shares jumped 8.29% on news of the settlement, which was reported earlier by Bloomberg. The company has lately been able to strengthen its business beyond winning payouts from competitors, consistently adding subscribers to its business for the last seven straight quarters as it strikes additional deals with television providers such as Virgin Media Inc. In its fiscal first quarter, TiVo reported adding a net 255,000 subscribers. Wall Street Journal
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