3 Reasons Why Google Should Buy Hulu

Hulu is reportedly receiving unsolicited buyout offers, and everyone seems to be handicapping this race.

The three media giants that already own a chunk of the company would naturally have the clearest path to swallowing Hulu whole, but every scenario that I have played out in my head ends with Google (Nasdaq: GOOG  ) gobbling up the popular video-streaming site.

Let's go over a few of the reasons why Big G is the one to watch here.

1. It doesn't want to make Yahoo! stronger.
The Los Angeles Times believes that Yahoo! (Nasdaq: YHOO  ) was the company that kicked off the speculative fury by making an unsolicited run at Hulu.

Google doesn't fear Yahoo!, but it can never underestimate a cash rich and catalyst poor giant being reawakened. Yahoo! is still a beast when it comes to display advertising and drawing portal traffic, and Hulu would make Yahoo! even more sticky and relevant.

Buying Hulu, in other words, keeps it away from Yahoo! or any other rival.

2. Google still needs to make nice with Tinseltown.
The rushed rollout of Google TV last year was a disaster. It nailed the technology. It nabbed great hardware partners. It forgot to strike the necessary licensing deals with studios to make sure that folks could stream network content.

The end result is that Google TV televisions and set-top boxes have gone through a few price cuts but they're still not penetrating the market in a way that doesn't embarrass Google. Snapping up Hulu would make it that much easier to play nice with Hollywood, though some studios may naturally be reluctant to embrace the move.

Netflix (Nasdaq: NFLX  ) did it. Studios hated Netflix as it popularized celluloid smorgasbords and devalued streams by offering them up to subscribers at no additional cost. They came around, largely because Netflix begin cutting fat checks. Google really only needs to cut one really fat check for Hulu to get things started.

3. Hulu is the key to slowing down Apple's global domination.
Analysts at Piper Jaffray and Ticonderoga Securities are once again discussing the inevitability of Apple (Nasdaq: AAPL  ) rolling out a full-blown premium high-def television set.

Google is running out of time to make Google TV relevant.

If history repeats, one can argue that Google can let Apple make Web-tethered television cool. The leading search engine can then step in and appeal to the cheaper mass market the way it has with Android in the smartphone space.

The problem here is that Google is already failing in the living room. Sony (NYSE: SNE  ) Google TV sets and Logitech (Nasdaq: LOGI  ) Revue boxes are a lot cheaper than they were during last fall's introductions, and Google will need to step up its game if its fledgling platform is to take off. Being the parent company of YouTube isn't enough, apparently.

Apple, on the other hand, is already rubbing elbows with Hollywood's digital giants through its iTunes storefront. Hulu is the quick fix that Google needs.

Is there anyone other than Google that makes a better fit when it comes to buying up Hulu? Share your thoughts in the comment box below.

The Motley Fool owns shares of Apple, Logitech International SA, Yahoo!, and Google. Motley Fool newsletter services have recommended buying shares of Logitech International SA, Netflix, Google, Apple, and Yahoo!. Motley Fool newsletter services have recommended creating a write covered call position in Logitech International SA. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended buying puts in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz has been a Netflix shareholder -- and subscriber -- since 2002. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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