Providence Equity Partners

With or without a sale, can Hulu work?

June 23, 2011: 4:26 PM ET

The TV networks that invested big to create the online video service don't seem to like what it's maturing into.

An evil plot to destroy the world. Enjoy! (Log...

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FORTUNE -- It must be immensely frustrating to either own or manage Hulu. The viewing public is moving away from cable and satellite toward Internet viewing, but so slowly and uncertainly that programmers can't simply port all their shows online and be done with it. They have to keep the cable and satellite providers happy because for now, that's where the money is.

And it's programmers that own Hulu, though not for long. The Los Angeles Times on Wednesday reported that Hulu is now on the block, no doubt largely because of the confusing morass of conflicts not only with cable and satellite providers, but also with Hulu's own CEO, Jason Kilar, over how many commercials to show and how much to charge for Hulu Plus, the service's premium offering that currently costs a paltry $8 a month.

But it's those same conflicts that could make selling Hulu a big challenge. Hulu can't be sold -- at least not for a decent return -- unless it has long-term programming commitments in place from its owners: Disney (DIS), Comcast (CMCSA), and News Corp. (NWSA) (Providence Equity Partners also holds a stake). Making those commitments simply prolongs the headaches the owners are trying to relieve through a sale, but nobody will want to buy Hulu unless it still has fresh, free television shows to offer.

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  • What private equity investors want

    Investors in the technology, information, and media space should expect a "culling of the herd," say two of the sector's big players.

    "Looking at our portfolio today, it's either feast or famine," said Jonathan Nelson, CEO of Providence Equity Partners. "Some [companies] are knocking the cover off the ball." In subscription-based businesses, "growth has developed undisturbed," while those that have been hurt the most rely on an advertising model.

    "People right now MORE

    - Jul 24, 2009 11:14 AM ET
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