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Analysis: Changes at Hulu May Come Faster With Kilar Gone

With the departure of CEO Jason Kilar at Hulu,
changes could come fast for the video streaming operation.

Hulu was set up by original partners NBCUniversal
and Fox to give them a high profile platform in a new world where programming
was being streamed -- first to PCs and laptops -- then later to tablets. Owning
Hulu gave the programmers some control over where their shows could be seen
legally and the ad revenue those shows could generate.

But the digital landscape has changed radically
since Hulu was started. Instead of being threatened by Netflix, Netflix,
Amazon, and other streamers have become huge sources of revenue for the
networks, which own a big share of their programming. And in a competitive
market, the networks have been able to set fairly strict rules about when shows
become available for streaming, limiting the damage digital exhibition can do
to the traditional advertising and cable distribution business model.

In 2011, Hulu owners -- which now include The Walt
Disney Co. -- nearly sold the
company, calling off an auction that was expected to generate $1.5 billion.
Among the bidders were Dish Network, Amazon and Google. At the time, News Corp.
COO Chase Carey told an investors conference that the value of Hulu to its owners
"dwarfed some of the values that were being put on it" and that
"this digital space is incredibly important and is going to be, over the
next five years and beyond, the most important field we have to navigate."

Carey said the partners would "do what's
necessary to make it grow."

One analyst believes that what's in the cards for
Hulu is for News Corp. to buy it, which would mean that what's good for Fox is
a more important consideration in how Hulu does business. That could mean less
investment in international expansion, less access to recently-aired shows and
higher advertising loads. And that could make running Hulu less interesting.

Richard Greenfield, analyst at BTIG, notes that
media company joint ventures always prove sub-optimal and that the consent
decree permitting Comcast to acquire control of NBCU prevents it from being
involved with managing Hulu.

"With Disney's focus on direct-to-consumer
apps for its major brands (ESPN, Disney, ABC and ABC Family), it appears
increasingly less interested in Hulu, while NBCUniversal would love a way to
exit or eliminate onerous aspects of the Comcast acquisition's consent
decree," Greenfield
says. He predicts that "following its separation from News Corp., Fox
Group [will seek] to acquire 100% of Hulu, with the deal incorporating 10-year
plus programming agreements with both NBC and ABC. With full ownership of Hulu,
Fox accelerates Hulu's push into original programming and explores adding cable
network content to create a virtual MVPD service."

That may or may not have coincided with Kilar's
vision for the future of Hulu. Under Hulu, revenues rose 65% to $695 million in
2012 and the Hulu Plus service has grown to more than 3 million paying
subscribers.  Hulu spent $500 million in content and did business with
more than 1,000 advertisers, up 28% from 2011. Kilar mentioned these
in the blog post announcing his plans to leave Hulu.

Running Hulu has also been good for Kilar.
According to published reports, when the other owners cashed out investor
Providence Equity, Kilar's shares in Hulu increased in value to the $100
million range. His success at Hulu has also made him a candidate for other top
jobs in the digital media field.