The deal is reportedly worth a little bit more than $1 billion and will be split between Disney
The estimated $1 billion is a steep dive from what the owners were looking to get a year ago. In fact, it's about 50% less to be exact. However at the time, the terms included exclusive long-term rights to the content (from ABC, FOX and NBC). Now it does not.
So it is possible that the content owners could double dip on the deal, first with the initial sale and then with content licensing.
You could argue that both parties walked away with a win. DirecTV needed something to boost their simple business model of rooftop satellite dishes and the owners were able to unload Hulu for a cool one billion bucks.
But the question isn't who the biggest winner in all of this is, but rather, who isn't. Yahoo!
While the deal (which is unofficial) fetched a couple hundred million more than Yahoo! was looking to spend, should it have chased the price a bit higher? Last month, CEO Marissa Mayer made headlines when she went out and picked picked up Tumblr for $1.1 billion.
Since the move was made in an effort to increase traffic -- specifically, from young adults -- wouldn't it seem prudent to spend a similar amount in a bid for Hulu? I mean, it has more than 4 million paying subscribers, which is double that of a year ago and helped generate almost $700 million in the last last year alone.
Even without the revenue figures, the company had more than 24 billion minutes viewed in the month of May and users watched more than 1 billion videos last quarter. With the average session lasting 45 minutes, it certainly has the engagement of its users, which is exactly what Yahoo! is looking for.
Now not to play devil's advocate, but as a shareholder I would have scratched my head a bit over the "buy everything in sight" strategy if it would have acquired two businesses for $1 billion apiece within such a short time span.
Unlike companies such as Apple
But, I guess in partial hindsight, I think I would rather have Hulu over Tumblr. Streaming video is huge right now and it will likely only get bigger over time. Hulu would be a huge boost to making -- and keeping -- Yahoo! a relevant player going forward.
However, by not partaking in the Hulu auction, Yahoo! does avoid certain issues. For one, it will save at least $1 billion. That's always nice. Yahoo! also won't have to worry about negotiating potentially expensive licensing contracts with content providers. Content is king and it usually comes at a costly price. In this case it's estimated to run about $250 million annually.
While the deal will likely cost at least half a billion dollars, plus the $350 million in debt that's saddled with Hulu, it does have some unique growth prospects in the world of video streaming.
The risks are obvious, but it's the reward that's not. Hulu is growing and is quite popular, but the question still remains: Is it worth the risk?
The deal isn't in the books by any means and Yahoo! can still outbid DirecTV if it wants too, but then the question of who the real winner is answered quite quickly: Hulu's current owners.
-- Written by Bret Kenwell in Petoskey, Mich. .
At the time of publication the author is long DIS and AAPL.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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