Analysis: Should Yahoo Buy Into Hulu?

Just as Yahoo weighs Wall Street advice to buy a significant stake in online video site Hulu, SNL Kagan reported the first-ever subscriber decline for the U.S. TV multichannel industry. Monday's figures—showing the worst combined subscriber performance of cable, satellite TV and telecom video providers since SNL Kagan started tracking data in the 1980s—suggest the timing is right for the Web titan to make a major bet on consumers canceling their pay TV subscriptions in favor of Web TV offers. Cable suffered its worst video loss, shedding 711,000 video subscribers in the second quarter, as six of the eight biggest cable firms reported their most dismal three-month period. Overall, cable, satellite TV and telecom providers shed 216,000 video customers in Q2 compared with a 378,000 gain in the same period a year earlier.SNL Kagan estimates that almost 3 million U.S. households will use Hulu and other Web TV options as their primary video solution by the end of the year, up from 1.5 million in 2009. For 2011, the company expects that figure to hit 4.3 million. (There are about 115 million TV households in the States.)"We particularly see continued declines for the cable industry," SNL Kagan analyst Ian Olgeirson told THR. Seasonal factors were key to the weak Q2, according to Sanford C. Bernstein analyst Craig Moffet, who predicted that multichannel TV operators will grow subscribers for the full year despite the second-quarter weakness. "Now, if we were to see weakness persist through the fourth quarter, then Houston, we'd have a problem," he said.The second quarter is always the weakest for TV providers, but the report also highlighted economic factors—such as high unemployment and the weak housing market—as well as the one-time effect of cancellations by those who had signed up for a TV service a year earlier amid deep discounts tied to the nation's digital TV transition.With media giants planning more Web TV offers that require a cable or satellite TV subscription—part of their TV Everywhere initiative—"this will cramp some of the flow" to Internet-only, but there still is "plenty of content" available online that will tempt more people to stop paying cable or other TV bills, Olgeirson added.Given that such attitudes play into Web video sites' hands, many on the Street argue that the acquisition of a major stake in Hulu by Yahoo would be pricey (given a reported $2 billion target valuation in a possible IPO this year) but could help super-charge Yahoo's efforts to provide more content.

Performance Marketing

Analysis: Should Yahoo Buy Into Hulu?

Georg Szalai, The Hollywood Reporter

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Georg Szalai, The Hollywood Reporter