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Originally published Tuesday, August 23, 2011 at 5:56 PM

Amazon.com expected to bid for Hulu video website

Initial bids are due Wednesday. Google, Yahoo and DirecTV also are expected to bid for Hulu.

Seattle Times business reporter

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Amazon.com appears poised to throw down the gauntlet in the fast-growing market for movies and TV shows streamed over the Internet.

A new report says the Seattle company is expected to bid for Hulu, a privately owned video website that makes money by selling ads and subscriptions for online access to popular TV shows such as "Glee" and "30 Rock."

Other suitors include Google, Yahoo and DirecTV, The Wall Street Journal reported this week, citing people familiar with the matter. Initial bids are due Wednesday, according to the Journal.

A winning proposal would pit Amazon against Netflix, the nation's dominant video-streaming service, with more than 20 million U.S. subscribers and 20,000-plus titles.

Hulu's owners — Walt Disney, News Corp., Comcast's NBCUniversal and private-equity firm Providence Equity Partners — reportedly expect to fetch at least $1.5 billion for the website and its content licenses.

Amazon has been building up its digital video offerings amid widespread speculation that it's preparing to introduce a new touch-screen computer tablet to take on Apple's top-selling iPad.

"Will Amazon bid for Hulu? They have to at least consider it," said analyst Collin Gillis of BGC Partners. "A media-consumption tablet with Prime movies and Hulu TV shows would be pretty compelling."

Amazon spokeswoman Mary Osako declined to comment, saying the company has a long-standing policy of not publicly discussing rumors or speculation. Hulu spokeswoman Elisa Schreiber also declined to comment.

Last week, Amazon announced that its pay-as-you-go Instant Video service has more than 100,000 titles available for rent or purchase, while the number of movies and TV shows available for free, unlimited streaming to Amazon Prime members tops 9,000.

In February, Amazon added about 5,000 movies and TV shows to its $79-a-year Prime membership program. Amazon Prime entitles members to free two-day shipping or cheap overnight delivery of products bought on Amazon's website.

Analyst Eric Wold, of Merriman Capital in San Francisco, said an Amazon purchase of Hulu could pose a serious threat to Netflix.

"With just about all of Amazon's streaming content for its Prime subscribers also found on Netflix, we believe that acquiring Hulu would definitely bring its digital offering to a new level," Wold wrote in a research note Monday.

Gillis said Prime titles tend to be "pretty old," rather than new releases. "Right now, it's a place-holder," he said.

Still, both analysts said they would not be surprised to see Google make the winning bid for Hulu.

Google, which owns video-sharing website YouTube, is expected to go toe to toe with broadcasters and cable operators by organizing its programming — both user-generated video and professionally produced original content — into televisionlike channels.

Although Google recently announced plans to buy Motorola Mobility for $12.5 billion, it has plenty of cash on hand: around $39.1 billion as of June 30.

Amazon reported $6.3 billion in cash at the end of June.

Wold said that while DirecTV appears motivated to buy Hulu after Dish Network's recent purchase of Blockbuster, Google and Amazon are more "comfortable bidding higher and working though the likely discussions around content availability and timing."

An Amazon-Hulu deal would be a homecoming of sorts for Hulu CEO Jason Kilar. He worked for nearly a decade at Amazon, where he led its North American media businesses, before taking the helm at Hulu in 2007.

Los Angeles-based Hulu, which made its Internet debut in 2008, has struggled at times with the diverging interests of its media owners and management team, so the owners began to explore a sale around June, according to the Journal.

Yahoo's earlier, unsolicited interest in Hulu was said to be another factor.

In a recent post, Kilar said Hulu added more subscribers to its $7.99-a-month Hulu Plus program in June than in April and May combined, putting it on pace to exceed 1 million subscribers by the end of summer — a milestone it had not expected to reach until the end of 2011.

Kilar also said Hulu expects to generate nearly $500 million in revenue for the year.

Last month, 3.6 billion video ads were shown in the United States, with Hulu accounting for 783 million, putting it well ahead of its rivals, according to measurement firm ComScore.

"In Amazon's case, it really makes sense, given its big push into digital media," said Gillis, the BGC analyst.

"It also is well-positioned for an advertising play because of all the consumer data it collects," he added. "Right now, it buys a lot of advertising, but it could be booking advertising revenue."

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com

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