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Is Hulu's Hoop Worth Jumping Through?

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The latest potential suitor for Hulu is AT&T (NYSE: T  ) , according to reporting by AllThingsD. Sources "close to" AT&T told AllThings D the company is talking with investment and media company Chernin Group about joining forces in a bid for the online video provider.

The Chernin Group would appear to be good company in such an endeavor. Its head, Peter Chernin, is a founder of Hulu and should be quite familiar with its operations. Chernin is also the former COO of News Corp. (NASDAQ: FOXA  ) , one of the three current Hulu owners. The others are Disney (NYSE: DIS  ) and Comcast (NASDAQ: CMCSA  ) .

The Chernin Group reportedly offered $500 million for Hulu in April, but considering how much competition seems to be forming up, that bid may just elicit snickers from the owning triumvirate.

AllThings D also reports that bids have to be at least $1 billion, and DIRECTV (UNKNOWN: DTV.DL  ) is said to be ready with a bid of at least that much. Time Warner Cable (UNKNOWN: TWC.DL  ) , Yahoo! (NASDAQ: YHOO  ) , and the private-equity firms KKR, Guggenheim Digital, and Silverlake Partners are also ready to compete.

But that $1 billion ante seems small potatoes, considering Google's (NASDAQ: GOOGL  ) rumored $4 billion bid two years ago. That proposal was supposedly thrown out over disagreement on the length of streaming media rights.

It is the revenue from TV licensing fees that make selling Hulu attractive to its media company owners. TV programming makes up the great bulk of streaming video, accounting for 80% of all streaming units for the first quarter of 2013, according to the NPD Group.

Hulu and both (NASDAQ: AMZN  ) play second fiddle to SVOD giant Netflix (NASDAQ: NFLX  ) , but the distance between those two and Netflix is closing a bit, according to NPD. Netflix had a 90% share of video streaming during the first quarter, but that's four percentage points down from the same period last year.

Hulu Plus and Amazon Prime, on the other hand, saw growth. Though nothing to immediately threaten Netflix's dominance, it does show, however, that Netflix subscribers are willing to try other services.

So Netflix's hold on subscribers is not total. Does that mean Hulu would be worth a price tag in the multiple billions? As a benchmark, Netflix's market cap is around $12.25 billion, and Hulu's value would not be anywhere close to that.

If the lessons from Google's attempts to buy Hulu in 2011 still hold, it will be negotiations over licensing rights that could be crucial in any deal. Hulu's sellers would want the shortest licensing period they can get so that when the licenses expire, they can jack up the fees.

But a longer streaming rights period would be of higher value to Hulu's buyer.

With Peter Chernin's intimate experience with Hulu, his group -- along with AT&T if reports hold true -- would seem to have the best capability to judge where to draw the line in determining Hulu's true value.

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