The ongoing auction for video service Hulu is one of the most anticipated sales of the year in the entertainment world. But as Hulu's parent companies—News Corp. and the Walt Disney Co.—are evaluating their options, each passing day creates more problematic uncertainty. (Though Comcast is an equal owner, as part of its deal to acquire NBC Universal, it had to give up its voting stake. Disclosure: NBC Universal is the parent company of CNBC and CNBC.com ). Here is where things stand with the auction in a nutshell:
Each passing week of ambiguity is a growing issue for maintaining Hulu's executive team and workforce. Questions are looming about what Hulu would look like under each potential owner—and what its longevity will be once its media giant parents aren't as invested in its future. The company continues to lose top executives and engineers and it's impossible to for the company to hire top talent. To stop the bleeding, and nail down a permanent CEO, the parent companies need to strike a deal.
Many industry sources speculate that it's possible the media parents won't want to take one of these deals--and the media parents themselves have said they're not determined to sell, but rather open to all options. But it is my understanding that with Hulu on the auction block for the second time in two years, not selling is not such a viable option. (Clarification: See below)
Another potential problem, depending on who buys the company, is the culture clash, which could send employees walking. Despite the fact that it's owned by three media giants, Hulu has maintained a "start-up" vibe—its offices have foosball tables, Silicon Valley-style free food, and every employee has desks that can adjust to standing height. If Time Warner Cable, the most traditional of the potential buyers, wins the auction, we can expect more Hulu employees to take off.
Though there have been more bids, sources tell me that there are four buyers that are the most serious, based on the amount of due diligence done: DirecTV, Time Warner Cable, plus the original two bidders, Guggenheim and the Chernin Group (in conjunction with Providence Equity Partners and Qatar). Though others, including Yahoo, have submitted bids, because the bids are non-binding, my sources tell me Yahoo, along with private equity firms Silverlake and KKR, would need to do more work before a deal is final.
Though DirecTV has bid as much as $1 billion, none of the offers are an apples-to-apples comparison. Sources tell me Time Warner Cable just wants to invest, with current owners maintaining a stake. Another complicating factor: Hulu's debt load of $350 million, and how the new owner chooses to handle it.