Hulu Needs Google

When it was announced last week that Hulu had received an unsolicited buyout offer and was seriously considering it, speculation began about what company would make a good fit. Fellow Fool Anders Bylund went over the insider and outsider possibilities and concluded that Google (Nasdaq: GOOG  ) and Apple (Nasdaq: AAPL  ) made a lot of sense for strategic reasons.

In Apple's case, the logic is that Hulu could help make Apple TV the product we hope it can be and that the iCloud would somehow play a role. But the reality is that Apple isn't going to be in every device the way Netflix (Nasdaq: NFLX  ) is, and that's the real competition Hulu needs to focus on.

That's why Hulu needs Google.

The sequel to Google TV
For the most part, Google TV was a flop. But it did give Google some valuable experience in what it would take to enter the on-demand media market. It also showed that Google has the power to quickly make its way into lots of devices -- something Netflix has managed to do quite well since it began focusing on streaming media.  

Google provides a business model that matches Hulu's needs. Google is, after all, an advertising matchmaker that has more information on your online interests than anyone else does and could target ads on Hulu. And unlike Netflix, a company based on a licensing model, Hulu is ad-driven -- a perfect match for Google. In fact, it's not too dissimilar from YouTube, except with television shows instead of cats and trick basketball shots.

Fits the model
Google's business model for products such as Android is to get as many people connected to the Internet as possible. Buying Hulu could do the same thing for television and movies.

Hulu doesn't have to be Netflix to compete in this market. Netflix has built a great business around commercial-free content, but Google could provide premium ad content that could provide long-term support for Hulu's business model -- not to mention the independence and scale that Hulu needs right now.

There could be options for free commercial-driven content, subscriptions, or even single-use paid content, as iTunes offers. Under Google, the possibilities of what Hulu could be are limitless.

One sticky problem
Disney
(NYSE: DIS  ) , Comcast (Nasdaq: CMCSA  ) , and News Corp. (Nasdaq: NWS  ) each own a piece of Hulu, and content deals with any buyer would have to be arranged. Although Google has arranged Google Music without licensing agreements from record labels, I think the company would be more receptive to working out licensing deals with television and movie studios. After all, Netflix has already set a precedent that studios are willing to make licensing agreements to stream their content. And Google would need to go this route anyway, because for Hulu to truly compete, it has to have the content to make it a powerhouse.

Time will tell whether a deal happens, but I have my hopes that a Google purchase becomes a reality.

Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.

The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Walt Disney, Apple, Google, and Netflix, creating a bull call spread position in Apple, and buying puts in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.


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