ABC Takes Significant Stake in Hulu

Disney Will Be Equal Partner With NBC Universal, News Corp. in Online Video Site

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NEW YORK (AdAge.com) -- After months of talks, Walt Disney Co. has taken a stake in Hulu, and made ABC the third of four major broadcast networks to distribute content through the web TV service.

The deal brings prime-time ABC shows like 'Grey's Anatomy,' as well as shows from Disney cable networks such as ABC Family, SoapNet and Disney Channel to Hulu.
The deal brings prime-time ABC shows like 'Grey's Anatomy,' as well as shows from Disney cable networks such as ABC Family, SoapNet and Disney Channel to Hulu. Credit: ABC
The deal brings full-length shows from ABC and Disney cable channels to Hulu, which has built itself into a top video portal in the past year by distributing shows from NBC, Fox and 150 other content partners.

Disney took a 27% stake in the company, comparable to stakes held by NBC Universal and News Corp., and, like the other two partners, agreed to invest marketing dollars in the venture, according to PaidContent.

Private-equity firm Providence Equity Partners also holds a stake, and invested cash as part of a $100 million outlay at the outset. Hulu employees also own a small stake.

The deal is a sign that online TV and Hulu are becoming part of the mainstream. More people in the U.S. are watching video online than recorded on DVRs, according to Nielsen's most recent "Three Screen" report. Media buyer Magna Global estimates that online-video ad spending will grow to $699 million in 2009 from $530 million in 2008.

Agreement to extend exclusivity
As part of adding ABC to Hulu, NBC Universal and New Corp. agreed to extend Hulu's exclusivity, which was set to expire at the end of this year, meaning Hulu will be the exclusive third-party distributor of ABC, NBC and Fox content for the next two years.

The deal brings to Hulu prime-time ABC shows such as "Lost," "Grey's Anatomy" and "Desperate Housewives," as well as shows from Disney cable networks such as ABC Family, SoapNet and Disney Channel. Disney will also provide some select movies to the ad-supported service. Hulu will create a Disney location in its channel lineup.

The deal ends months of complex talks between Hulu and the media company, which had pursued a strategy of distributing shows on ABC.com, local TV affiliate websites and AOL. ABC spokeswoman Karen Hobson cited research that showed little overlap between the ABC.com and Hulu audiences. Only 8% of ABC.com's viewers also visited Hulu, and only 13% of Hulu's viewers visited ABC.com.

Hulu was the No. 2 online video distributor, after YouTube, in March, with 348 million total video streams, according to Nielsen Video Census. ComScore puts Hulu at No. 3 behind YouTube and MySpace Video, with 380 million total streams.

The deal gives a big lift to Hulu, which now counts CBS as its lone major-network holdout. Hulu withdrew its programming from CBS website TV.com over an undisclosed contract violation. Both sides are said to be considering their legal options.

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