It’s been a long time coming, but private equity firm Providence Equity Partners has sold its stake in Hulu for $200 million, a person familiar with the matter has confirmed. The buyout of the firm’s shares, which has closed but has not yet been announced, will have a huge impact on Hulu and could significantly shape its future.
Providence was an early investor in the online video site — back before it was Hulu — as News Corp.’s Peter Chernin and NBC Universal’s Jeff Zucker sought to create a new aggregator for their long-form broadcast TV content. In 2007, Providence put $100 million into Hulu and retained a 10-percent stake in the joint venture.
During its tenure, Providence acted as an independent voice on the board, which was otherwise controlled by Hulu’s media partners. According to a source, it also helped bring Disney — the third broadcast partner to invest and join the consortium — on board in 2009. But after five years serving as an outside investor, the private equity firm will no longer participate. With Providence out, that leaves just NBC Universal, Fox, and Disney as investors, with the latter two holding the majority of Hulu’s board seats.
The buyout has long been expected, as Providence had an option to exercise its shares in Hulu at 2x the amount it put in, in lieu of an IPO or sale to another company. Hulu looked at both options over the years: It explored an IPO in 2010 but backed away from those plans. The following year, Hulu put itself on the block and entertained sale options from a number of suitors such as Google and Dish, before ultimately deciding not to sell.Will CEO Jason Kilar Stay?
The sale of Providence shares also means that other Hulu employees can cash out. That includes CEO Jason Kilar, who has been seen as the driving force behind the video site. According to a report in Variety in August, Kilar stands to gain about $100 million as a result.
That, by itself, would be seen by many as a reason to leave Hulu and to take a good long vacation before figuring out what to do next. But a bigger reason might be the current board structure, which would leave Kilar with few real allies as the company moves forward.
Hulu was formed at a time when most media companies were still experimenting with web video as a way to combat piracy and make a little incremental money along the way. As a result, Hulu had been founded with an exclusive license to the content of its media partners Fox, ABC, and NBC. But today, with the growth of competing online video properties such as Netflix and Amazon Prime Video, it’s become clear that there’s more money to be made by licensing content to multiple distributors.