You love Apple; you love Hulu. You love watching Hulu on your Apple products. So you're probably psyched at the possibility that Apple might purchase Hulu, which we reported earlier this morning. But, as beautiful as this marriage sounds, there are a couple of reasons it doesn't look like it will work out.
The two companies just don't mesh and the disconnects between the two companies could impede the sale. Hulu does not exactly fit into Apple's iPhone/iPod/iPad model, explains GigaOm's Ryan Lawler "It [Apple] might have a problem with an independent subsidiary that operates under its own brand name and isn’t tightly integrated with the rest of its products." Hulu doesn't have that Apple veneer, that might not sit well with Apple or its fanbase.
Beyond the brand disconnect, the two companies have different thoughts on how to monetize their product. Apple sells its content--you buy music on iTunes, or iPad subscriptions--whereas Hulu subsidizes its offerings with ads. "Apple doesn't do free ad-supported business models, which is what makes Hulu's business go," Forbes' Brian Caulfield points out. With the sale, however, Apple could adopt Hulu's model, moving away from the iTunes way, ZDNet's Jason D. O'Grady argues. "We could be seeing a shift away from paying for video content to streaming it for free." But why would Apple abandon its very popular iTunes model? The fact that it has seen such success with iTunes is just another red flag for the deal, believe DealBook's Evelyn Rusli's and Michael De La Merced.
Still, some analysts argue that Apple already has the wherewithal to build a similar video streaming service on its own because of its pre-existing relationships with content providers and its increasingly powerful position in the entertainment industry. The ITunes platform has about 225 million user accounts tied to credit cards.
If iTunes already has a lot of the necessary infrastructure, why would a company known for its own innovative products buy an already-existing platform (Hulu) if they could just make something better on their own, wonders Lawler at GigaOm.
And even if Apple decides it has something to gain from the acquisition, rumors are just rumors. Bloomberg only reported that the two companies met for "preliminary discussions," which doesn't mean they've reached a deal--it's just talk, AllThingsD's Peter Kafka writes. "If you stop by a Subaru dealer and end up kicking the tires on a new Outback, are you in early talks to consider a bid on a new Outback?" Lawler seconds that sentiment, reminding us that "preliminary discussions" means nothing too serious, "Just like all the other companies linked to the Hulu sale, it’s important to note that “preliminary discussions” here are just that — a chance for execs to get to know one another, take a look at the financials and figure out whether an actual acquisition could make sense, or not."