The bidding war for Hulu is heating up, with Google, Yahoo, Amazon, and DirecTV still in the mix. Google is rumored to have made an aggressive offer for Hulu. It may be hard for anyone to match Google’s ability to pay, but Amazon needs to find a way to come out on top — not just that Amazon wants Hulu, but because Amazon really needs Hulu and is best positioned to make the most of Hulu. Here’s why:
1. Amazon could become the iTunes of video. No one has been able to challenge Apple’s success with iTunes in the downloadable music space. Despite Amazon’s position as one of the largest music retailers in the business, it has not been able to provide much competition to iTunes with they MP3 download store. The reason is simple: Apple controlled the entire experience by providing an integrated phone/mobile OS/Internet service experience. Amazon toyed with the idea in the past of creating an iPod competitor, but the project was shelved as the market transitioned from iPod devices to the iPhone. Despite Apple’s success with music, it has been unable to translate that success to video. So there’s an opening here for Amazon, and the company needs to go after it aggressively.
2. It’ll take video to push Kindle tablet sales. Amazon’s success with the Kindle, which is expected to sell 25 million to 35 million units this year, has given it the confidence to develop an Android powered tablet to compete with the iPad. These numbers are respectable given the nine million iPads Apple reportedly sold last quarter. The iPad is a great device for many things — web browser, emails — but it is a killer device for watching video. My consumption of online video has skyrocketed since purchasing an iPad. Amazon can leverage a large installed base of Kindle owners who could upgrade to the Kindle tablet that happens to provide the ability to purchase and stream premium video content.
3. Amazon has the right leverage with studios and broadcasters. Hulu has been a success from a user adoption standpoint and Hulu’s CEO, Jason Kilar, has generated significant revenue in a short amount of time. Under normal circumstances, investors wouldn’t want to unload a winner – they’d keep riding it. But the threat Hulu posses to its investors, NBC/Comcast in particular, is too great, and the studios want to cash out. The big elephant in the room is the content licenses. Without access to premium content, Hulu is dead. Any potential buyer has to wonder what happens when it comes time to renegotiate those licenses down the road. As we’ve all seen with Netflix and Starz, there are no guarantees. Many book publishers felt threatened by Amazon’s ebook initiative, but as the largest retailer of books Amazon has the power to turn promotions on or off for a new book. Amazon, unlike Hulu’s other bidders, is one of the largest DVD retailers in the world. Since DVD purchases are a big part of revenue for new movies, older movie catalogs, and premium TV shows (e.g. Dexter, Mad Men), the studios can’t jerk Amazon around on licenses. If Starz threatened to pull online video rights from Amazon, Amazon could simply pull all Starz DVDs from its retail store.
(Read full blog post on VentureBeat)
2. It’ll take video to push Kindle tablet sales. Amazon’s success with the Kindle, which is expected to sell 25 million to 35 million units this year, has given it the confidence to develop an Android powered tablet to compete with the iPad. These numbers are respectable given the nine million iPads Apple reportedly sold last quarter. The iPad is a great device for many things — web browser, emails — but it is a killer device for watching video. My consumption of online video has skyrocketed since purchasing an iPad. Amazon can leverage a large installed base of Kindle owners who could upgrade to the Kindle tablet that happens to provide the ability to purchase and stream premium video content.
3. Amazon has the right leverage with studios and broadcasters. Hulu has been a success from a user adoption standpoint and Hulu’s CEO, Jason Kilar, has generated significant revenue in a short amount of time. Under normal circumstances, investors wouldn’t want to unload a winner – they’d keep riding it. But the threat Hulu posses to its investors, NBC/Comcast in particular, is too great, and the studios want to cash out. The big elephant in the room is the content licenses. Without access to premium content, Hulu is dead. Any potential buyer has to wonder what happens when it comes time to renegotiate those licenses down the road. As we’ve all seen with Netflix and Starz, there are no guarantees. Many book publishers felt threatened by Amazon’s ebook initiative, but as the largest retailer of books Amazon has the power to turn promotions on or off for a new book. Amazon, unlike Hulu’s other bidders, is one of the largest DVD retailers in the world. Since DVD purchases are a big part of revenue for new movies, older movie catalogs, and premium TV shows (e.g. Dexter, Mad Men), the studios can’t jerk Amazon around on licenses. If Starz threatened to pull online video rights from Amazon, Amazon could simply pull all Starz DVDs from its retail store.
(Read full blog post on VentureBeat)
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