Why don’t Hulu’s parents love it?

Online Video It may be time to call Child Protective Services about the ongoing abuse of Hulu. As they did twice before with Boxee and Kylo, Hulu’s broadcast parent companies have forced the JV startup to block access to the site by Google TV. Why? Because they still don’t want Hulu playing in the living room.

NBC and Fox launched Hulu with much fanfare in 2008 (later joined by ABC) to let viewers watch ad-supported TV shows for free on their PCs using a standard web browser. But when Boxee, Kylo and Google took the next logical step of sticking a browser in (or on) the TV the networks panicked, worried over what their friends in the cable TV business might say. So they suspended Hulu’s TV privileges.

Now Hulu is acting up again, threatening to run away from home by launching an IPO. The latest version of the story has Hulu raising up to $300 million next year through a public offering led by Morgan Stanley.

The threat is likely to prove empty, however. The rumored IPO would value Hulu at $2 billion, meaning the $300 million would represent a minority stake. Who would invest in a minority stake in a company whose controlling shareholders were clearly as ambivalent about the whole enterprise as are Hulu’s current parents?

Hulu does need to raise money, however. It’s current licensing deals with its parent companies expire next year and the networks are going to need to get more revenue from the venture if they’re going to justify continued hikes in retransmission fees from other cable and satellite distributors. If Hulu is going to compete effectively with Netflix, moreover, it’s going to need to bolster its movie offerings, which means shelling out for those rights. If it can’t raise the money through an IPO where will it come from?

The truth may be that Hulu is simply not tenable as currently structured. The $300 million it reportedly hopes to raise through the IPO is probably not enough in any case for Hulu to acquire all the rights it’s going to need. Yet it’s raising even that much publicly is likely to be a stretch given the uncertainty about its future. Another option would be for its current parents to pour more money into the venture themselves, but given their ambivalence that seems unlikely.

Converting Hulu fully to a paid subscription service via Hulu Plus might alleviate some of the networks’ ambivalence, but the service would need to bolster its content offerings considerably for that to be a viable long-term strategy. Securing that content will take a lot of money, which Hulu currently has little hope of raising.

As a viewer, I love Hulu. But it’s hard to see a way out of its current strategic dilemma short of a complete spin-off.

Perhaps the best thing that could happen would be for the FCC or Justice Department to remove the child from its abusive home by forcing Comcast to divest NBC’s interest in Hulu as a condition of approving their proposed merger. That might get Fox and ABC looking for a way out, too, avoiding another senseless tragedy.

Further reading:

Logitech Revue: The Wrong Choice for Cord-Cutters

Hulu Blocking Google TV — As Part of an Ingenious Plan To Blockade Additional Ad Viewers

Will Google TV Get Hulu? Not Likely, Unless It’s Hulu Plus