Apple Still Bet to Bid for Hulu | PCWorld

via Apple Still Bet to Bid for Hulu | PCWorld

.Apple Still Bet to Bid for Hulu

By Ben Camm-Jones, Macworld-U.K.    Jul 23, 2011 4:40 pm

Apple is considering making a bid for the online video service Hulu, according to a report.

Two industry insiders with knowledge of the bid told Bloomberg that negotiations between the two companies were already taking place.

However, the sources only spoke to Bloomberg on condition of anonymity and both Apple and Hulu have declined to comment on the report.

Hulu, which is owned by Walt Disney, News Corp, Comcast, and equity firm Providence Equity Partners, was put up for sale last month. Other interested parties include Yahoo, Microsoft, and Google, according to reports.

Analysts, though, said that Apple was focused on video output and that reports that it was investigating a deal with Hulu were unsurprising. (See also “Why Apple and Hulu Aren’t Made for Each Other”).

Indeed, Hulu is expected to hit the one million subscriber milestone next month and it was estimated by Hulu CEO Jason Kilar that the company could turn over $500 million in revenue for 2011. A subscription-based service would add another string to the bow of iTunes, which currently lets customers either rent or buy video content outright.

This would put Apple in a strong position to compete with Netflix, which currently dominates the US video-on-demand market with more than 23 million subscribers.

Blackbird Brief: Without question, one weak link in the Apple iTunes empire is video delivery. AppleTV has not captured consumers’ heart in the same way that the iPad, iPod and iPhone have. Additionally, Apple does not have a subscription model either for music or video. Some criticisms of Apple’s rumored pursuit of Hulu are that 1)Hulu uses flash, 2) Hulu gives away some content, and 3) Hulu uses some competing platforms. I think these criticisms are without merit. First, youtube was primarily a flash based video system until the iPhone was released. The video platform is not an issue, Apple is interested in the video delivery infrastructure. The video itself can always be re-encoded. Second, Hulu gives away some content, but not without advertising. That does not mean that that content does not generate revenue.  Three, of course, Hulu supports competing platforms to deliver its content. This is a non-issue. This would not be the first time Apple entered a market by using a competing platform. When Apple released the iPod, it also released iTunes software for Windows, a competing platform. Apple saw that the most efficient way to distribute music was through mp3s and the computer. Why not deliver that format to as many people as possible. I believe that Apple sees video distribution the same way. Why not purchase a service that already can be delivered to many devices? It just makes sense. Additionally, with the enormous amount of cash that Apple has coupled with its enormous brand value, Apple could replace Netflix as the preferred video delivery system in most people’s homes sooner rather than later.