Hulu Acquisition Could Be Boost to Time Warner Stock
Time Warner Inc. (NYSE:TWX) wants to buy into Hulu, LLC, which is perhaps Netflix, Inc.’s main competitor. Time Warner stock has been trading in the $70.00-per-share range, which is close to its yearly low. The addition of Hulu to its portfolio of assets could boost TWX stock back to the $90.00 range.
Time Warner is looking to take a 25% stake in Hulu, an online video streaming service, according to The Wall Street Journal. (Source: “Hulu in Talks to Sell Stake to Time Warner,” The Wall Street Journal, November 12, 2015.) The move would have the dual effect of bringing Time Warner, one of the world’s largest media and entertainment companies, into the video streaming business, while strengthening Hulu’s ability to perform against the likes of competitors like Netflix or Amazon.com, Inc.
For the time being, the discussions are said to be in the preliminary stage, but the stake would be based on Hulu’s total estimated value of more than $5.0 billion. Time Warner would inject money into Hulu and ensure that the service be granted more licenses to broadcast programs to which it currently lacks access. Time Warner stock is already supported by the fact that the network already owns the HBO pay channel, which launched its own subscription-based video streaming service in October.
Hulu Could Be a Game-Changer for Time Warner
For instance, fans of the Twilight franchise will be thrilled to find out that Stephenie Meyer, author of the literary saga, has signed with Hulu to produce a TV series called Rook, to be produced by Lionsgate. (Source: “Lionsgate Developing TV Series With ‘Twilight’ Writer Stephenie Meyer For Hulu,” Deadline Hollywood, November 10, 2015.) Given the popularity of Twilight, Rook should perform very well in most markets where Hulu is available. This is just an example of how Time Warner stock can benefit from buying into Hulu. So far, Hulu has not given away too many details, or even if vampires are involved in the new series, but Meyer has already produced two shows, Austenland and The Host.
In addition, the company is a media powerhouse with such channels as CNN, TNT, TBS, Cartoon Network, and TMC in its portfolio. As for Hulu, its ownership is split among three other U.S. media companies, including The Walt Disney Company, Comcast Corporation, and Twenty-First Century Fox, Inc. (parent company of NBC Universal). Should Time Warner confirm the transaction, the other three part owners would likely reduced their own holdings from 33% to 25% respectively.
Funded in 2007, Hulu is one of the pioneers of pay-TV video streaming in the United States, but Netflix has overtaken it over the past few years. Hulu has also suffered during the past few years, even though the company has stepped up its investments in the past few months, buying rights to broadcast or produce original content. A reconciliation with Time Warner could enhance this strategy and fend off the competition from Netflix and Amazon.com.