If You Can't Beat Them, Buy Them: Pay-TV Answers Disruption With Bids on Hulu

DirecTV, Time Warner Cable and AT&T Try to Keep Up with Changing Habits

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Pay-TV systems have emerged as serious contenders for Hulu in bidding completed on July 5, according to people with knowledge of the situation. DirecTV made a bid for the online video service, while Time Warner Cable offered to acquire a stake in the company, people with knowledge of the situation said yesterday.

Seth Myers' 'The Awesomes,' part of Hulu's effort to attract subscribers with original shows.
Seth Myers' 'The Awesomes,' part of Hulu's effort to attract subscribers with original shows.

AT&T, which operates the U-verse pay TV-service, also submitted a joint bid with Chernin Group, producer of "Rise of the Planet of the Apes" film and TV's "New Girl" as well as an investor in startups such as Tumblr and Flipboard. Officials of AT&T and Chernin declined to comment last week.

The terms of the offers weren't known. Hulu is owned by Walt Disney Co., 21st Century Fox and Comcast Corp.

DirecTV is the largest satellite company in the U.S. and the No. 2 pay-TV company overall behind Comcast. Time Warner Cable is the second-largest U.S. cable TV provider. Their interest, along with AT&T's, suggests that pay-TV providers want to hedge against the rise of streaming video providers such as Netflix, Redbox Instant by Verizon, Amazon Prime and, of course, Hulu.

Like the other newcomers, Hulu offers a lower-cost option than the video subscriptions on cable and satellite systems, including a limited free version and an $8-a-month subscription with access to more shows on more devices. It had more than 4 million paying customers as of the first quarter. Potential bidders have grumbled, however, that the company's traditional-media owners want to further restrict the content Hulu will offer, undermining its value to consumers.

Intel, meanwhile, is planning an entirely new pay-TV service, but seems to be aiming to compete on quality more than price.

Meredith Kendall, a spokeswoman for Los Angeles-based Hulu, declined to comment as did Robert Mercer, of El Segundo, California-based DirecTV. Maureen Huff, with New York-based Time Warner Cable, didn't return calls seeking comment.

~ Bloomberg News with Ad Age staff ~

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