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Infinite Loop / The Apple Ecosystem

Rumored Apple bid for Hulu doesn’t make a whole lot of sense

The grapevine says that Apple, like many others, is considering making a bid …

Is Apple mulling a bid to buy streaming TV site Hulu? According to sources that spoke to Bloomberg, the answer is yes. But does it actually make sense? Apple may have an interest in expanding its TV and movie offerings, but Hulu's business model doesn't match up with Apple's product strategy. Such a buyout would require some major reworking of one of those two, and Apple would likely rather spend its resources boosting its own services.

The news that Hulu was putting itself up for sale came out immediately after Yahoo approached the company to discuss a possible acquisition last month. Since then, pretty much every company with any kind of interest in online video has been rumored to be mulling a bid, including Google and Microsoft (the latter was said to have dropped out of the bidding earlier this week).

Now, Bloomberg's sources claim that Apple is in "early talks" to make an offer for Hulu. In exchange, Apple would get a five-year extension of Hulu's existing program rights, according to these sources, "including two years of exclusive access." Hulu already has exclusive online streaming licenses with Disney, News Corp., and Comcast/NBC in place, meaning that any prospective buyer would inherit those licenses until they run out.

The reasons why Apple might join the bidding seem obvious—the company is always trying to improve its offerings on iTunes, and life is beginning to move away from owning content to a more cloud-heavy experience. Still, while the content licenses that Hulu has in place are certainly attractive, it's not like Apple doesn't have that content on iTunes—it's all there, just in a different delivery format.

That's just one of several reasons why an Apple buyout of Hulu wouldn't necessarily make sense. A related reason is that Hulu's current content model doesn't match up with Apple's. The most obvious difference is that Hulu is currently set up as an ad-supported streaming site with a subscription offering on the side—the iTunes/Apple TV approach is based on on-demand rentals or purchases without ads. The two just don't go together, and wouldn't without some kind of major restructuring of both services, which would include changes to how Apple's devices work with them. Knowing Apple, that's not likely to be a move that the company would be interested in making right now.

Tech industry analyst Michael Gartenberg agrees. After tweeting some choice comments about the rumor this morning, I reached out to Gartenberg for further analysis. "Apple already has the access to most of the content for rent or sale" he told me via e-mail. Gartenberg went on to explain that a shift towards a subscription model would essentially mean funding competition against its own devices, which is where Apple makes its money. "Content for Apple helps sell devices, so I'm not sure that a free content offering helps them."

Indeed, iTunes content has long been considered a way to help Apple sell more iPhones, iPods, iPads, and now the Apple TV. And although the just-introduced iCloud doesn't won't support the syncing of video purchases when it goes live this fall (it's currently music-only), it's likely that it will do so eventually. Why pour money into Hulu when Apple could pour money into iTunes and iCloud?

And of course, there's one more reason why Apple and Hulu fans alike shouldn't get worked up over this rumor just yet: "Apple buying [insert Company of the Day here]" rumors are a dime a dozen. Like Gartenberg tweeted, "Pretty sure everyone from Google to my next door neighbor has been reported in talks with Hulu."

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