Disney to Take Equity Stake in Broadband Video Service, Hulu

The Walt Disney Company announced Thursday that, via its ABC Enterprises subsidiary, it will join NBC Universal, News Corp. (Fox) and Providence Equity Partners as a joint venture partner in and equity owner of the popular broadband video service, Hulu. The deal means that CBS is now the only major US broadcast network not involved in Hulu, which, according to recent figures from comScore is now the third-most popular broadband video site after YouTube and Fox Interactive Media. According to sources cited in a report by the Wall Street Journal, the deal will see Disney investing "an unspecified amount of cash" in Hulu and committing to spending $25 million for marketing (note: the Journal says that its sources told it that the amounts in question would be the same as those pledged by NBC Universal and News Corp. when they founded Hulu back in 2007). Following the closing of the deal, each of its three network owners will hold a roughly 27.5% stake in Hulu, the Journal said (note: according to a report in the New York Times, Disney's stake will be slightly smaller than those of the other two networks).

The deal, once closed, is set to provide Hulu with a substantial infusion of new content: it will allow the service to stream ad-supported, full-length episodes of a range of Disney's current and library primetime series, and will also enable it to offer a number of films from the Disney library. "From our landmark iTunes deal to our pioneering decision to stream ad-supported shows on our ABC.com player, Disney has sought to meet the constantly evolving viewing habits of our consumers, and today's Hulu announcement is the next important step in that ongoing journey," Disney president and CEO, Robert Iger, said in a prepared statement. "Disney and Hulu share a focus on delivering the highest-quality entertainment experience and we look forward to working with Hulu to build value for our consumers, our brands and our shareholders." In a posting on Hulu's corporate blog, the company's CEO, Jason Kilar, wrote that Hulu is "excited to help audiences and great shows like 'Lost' and 'Desperate Housewives' find each other via Hulu. We also are excited," he continued, "at the many ways this can enable us to better serve advertisers. But perhaps most importantly, we are smiling big today because we are honored to be working with a company that quite frankly inspired us from the very start of Hulu. Walt Disney was a founder, an innovator, a person with an atypically high quality bar, and someone who was maniacal in his obsession to delight his customers. Hulu has always taken great inspiration in that example and the culture Walt Disney created (which Bob Iger and his team carry forward and push to new levels)."

According to Disney and Hulu, new content that will be available on Hulu's service as a result of the new deal includes:
--Episodes of such ABC primetime programs as "Lost," "Grey's Anatomy," "Desperate Housewives," "Ugly Betty," "Samantha Who," "Scrubs," and "Private Practice," as well as full-length episodes of the ABC late-night talk show, "Jimmy Kimmel Live." (Note: Hulu will be the first third-party site to stream full episodes of ABC programming, which until now have been available only through the ABC.com Player. According to the New York Times, the new deal will see ABC giving Hulu an exclusive license to distribute its shows on Hulu.com and on its various partner sites. The Times also reports that, as part of the deal, NBC and Fox agreed to provide Hulu with exclusive access to their programming for another two years.)
--Episodes of such ABC Family programs as "The Secret Life of the American Teenager" and "Greek."
--Various series from ABC Daytime and SOAPnet, including "General Hospital" and "The View."
--Series from ABC's library, such as "Hope and Faith," "Less than Perfect," "Commander in Chief," "Who Wants to be a Millionaire?" and "Dancing with the Stars."
--A selection of programs from the Disney Channel, including "Wizards of Waverly Place" and "Phineas and Ferb." Disney Channel programs will be available through a new Disney location in the channel section of Hulu.com. (Note: a number of high-profile Disney properties will, however, not be available on Hulu, including most notably "Hannah Montana.")
--Library titles from Walt Disney Studios.
--A range of short-form content, including Webisodes, "sneak peaks," and episode recaps from ABC Entertainment, ABC Family and SOAPnet.

"Hulu, quite simply, now has the best premium content on the Web," Peter Chernin, president and chief operating officer of News Corp., said in a prepared statement. "With three major networks and over 150 leading content providers providing content, combined with the best video user interface anywhere on the Web, Hulu offers consumers the finest premium online video experience available today." Added Jeff Zucker, president and CEO of NBC Universal: "Hulu has shown that if you make quality content available on the Web and combine it with an unbeatable user experience, viewers will come, and so will advertisers. The addition of some of the best content Disney/ABC has to offer will only enhance Hulu's standing as a top site for high quality video entertainment."

Once its acquisition of a stake in Hulu is complete, Disney will have three seats on the company's board, which will be held by Iger; Anne Sweeney, co-chair of Disney Media Networks and president of the Disney/ABC Television Group; and Kevin Mayer, Disney's EVP of corporate strategy, business development and technology. All current directors from Hulu's other owners will retain their seats on the board.

According to the New York Times, Disney was also in negotiations to offer full episodes of its programming on YouTube. However, it eventually signed a deal to distribute only short clips from ABC and ESPN programs on the Google-owned platform. The Times reported that "people familiar with the negotiations said talks between Disney and YouTube broke down over how a deal would be structured, with Disney insisting on owning a stake in any joint venture."