"You'd have to be an idiot to accept the content licensing agreement they are proposing," said a knowledgeable insider
Disney and 21st Century Fox are placing such "onerous" demands on all the companies seeking to acquire Hulu that final bids could come in far below the $1 billion Hulu is seeking, an individual with knowledge of the negotiations told TheWrap.
The individual outlined a number of sticking points to a potential deal. They include purchase price, content exclusivity and delays before TV programming appears on the popular streaming site.
"You’d have to be an idiot to accept the content licensing agreement they are proposing,” the individual said, referring to the terms as "onerous."
Disney and Fox, which jointly own the online video service with Comcast, put Hulu up for sale earlier this year and solicited bids from Yahoo, DirecTV, Dish Network, Chernin Entertainment (along with AT&T), Guggenheim Digital Media, KKR and Silver Lake Partners.
Final bids are due Friday.
Yahoo submitted the lowest initial bid of all those companies, according to individuals close to the negotiations, but that was only the initial, non-binding bid. Final bids are binding.
Yet according to the first individual, Yahoo is not the only bidder unwilling to pay the $1 billion price tag owners are seeking. The individual said most of the bids will come in below that figure.
The bidders are balking because Fox and Disney are looking to restrict the shows Hulu has rights to, and raise the prices for what Hulu does receive. Though a co-owner, Comcast has no say in the affairs of Hulu due to FCC regulations.
Fox and Hulu declined to comment for this story; Disney did not respond to a request for comment.
Among the demands:
>> Disney and Fox want the rights to pull certain shows back and license them exclusively to other sites (including their own). If ABC, Fox, NBC, Bravo, SyFy or another network owned by Hulu's current benefactors has a show that becomes a big hit, they could pull that show and put it on their own site (or somewhere else).
>> The companies also wants to institute a 30-day delay before some of that content appears on Hulu. Hulu's access to first-run TV shows has been part of its appeal; the site has amassed a large and devoted user base that wanted to watch new episodes of shows from NBC, ABC and Fox without having to see them live.
>> Disney and Fox want the deal to include a provision licensing content to Hulu Plus for two years (instead of three or more, as some bidders have requested). That would give them the right to renegotiate after then, signaling that content prices will rise for any prospective owner.
Disney and Fox have also made certain demands regarding advertising sales and valuations. Disney and Fox want the rights to sell 90 percent of all advertising inventory with their own teams, and want each show that appears on Hulu Plus to have four ads per break in the second year.
The bidders deem that second requirement "way too much advertising for a paid service."
Fox and Disney could change the terms of the deal, or convince one bidder to step up and accept them. One of those individuals predicted that Hulu and its owners will recieve several very strong bids and cautioned that anyone suggesting otherwise was simply trying to scare off buyers or lower the price.
The companies have also tried to sell Hulu before. Only time (and money) will tell how it plays out this time.