Disney will offer full-length episodes of hit shows like 'Desperate Housewives' on the ad-supported website, Hulu.
Mouse shows such as 'Grey's Anatomy' will be seen on Hulu.
The Mouse House is climbing aboard the Hulu express.
Disney has signed on as an equity partner with NBC Universal, News Corp. and Providence Equity Partners in the fast-growing Internet vid distrib that ranks No. 2 to YouTube as a purveyor of Web video. Move leaves CBS as the only Big Four network without a presence on Hulu.
Once the deal formally closes, Disney will make full-length episodes and other content from a range of Mouse House shows, including ABC hits "Lost," "Grey's Anatomy" and "Desperate Housewives," available for ad-supported webstreaming via Hulu's proprietary player.
Specifics of the transaction unveiled Thursday were not disclosed, but it's understood that Disney will have nearly the same stake in Hulu as NBC U and News Corp., or about 27%. Deal calls for Disney to provide programs to the site and make a cash investment in Hulu. (Bloomberg News pegged it at less than $35 million.)
Disney will get three seats on the 12-member Hulu board, to be held by Disney CEO Robert Iger, Disney-ABC Television Group chief Anne Sweeney and Kevin Mayer, the Mouse's exec veep of corporate strategy, business development and technology.
The deal will require regulatory approvals. Hulu's fast rise and the presence of three of the Big Four nets could raise antitrust flags for the feds.
Disney's tie-up with Hulu comes as Hollywood majors are increasingly making movies and TV shows available free online in an effort to chase online ad dollars and to offer legal alternatives to pirated content.
For Hulu, recruiting Disney into the fold reps a big victory and a validation of NBC U and News Corp.'s investment in the 2-year-old venture. Fox and the Peacock loaded up Hulu with top-draw programs, even as some in the biz question whether online availability for network shows is cannibalizing network ratings -- and more significantly, cutting into the prices that nets can charge for commercial spots.
Digital advertising is growing, although its momentum has slowed amid the overall advertising slump, and it still only delivers a fraction of the revenue that the nets derive from traditional TV advertising. For starters, full-length episodes streamed online include only about one-quarter of the commercials that the same program would carry on a telecast.
Hulu, now in its second year, is not believed to have turned a profit yet. But its advertising sales are running "well ahead of projections," NBC U boss Jeff Zucker said.
"We're not naive to think that there's zero cannibalization (of network vs. online) viewing," Zucker said. "Our research indicates it is quite minimal."
CBS, meanwhile, has focused in recent months on beefing up its TV.com website with full-length episodes of contempo and vintage Eye-owned prorgrams. The Eye also has a limited selection of shows available through YouTube, Yahoo, MSN and other outlets. But CBS issued a statement Thursday indicating that it has concerns about Hulu's business models, particularly the notion of allowing Hulu's sales force to hawk CBS programming to Madison Avenue.
CBS has focused on "open, non-exclusive content partnerships" structured so as to allow the Eye to "control our distribution, sales and profit," the statement said. CBS "also believes that controlling our own rights for that content -- in all media -- preserves its value in a multi-platform business system."
CBS is known to have used its online streaming rights as leverage in recent retransmission consent negotiations with cable, satellite and telco operators for its 29 O&O TV stations. Having a broad presence on Hulu could potentially complicate those negotiations. CBS' TV.com had a license agreement to distrib Hulu content, but Hulu pulled its content from TV.com as it became clear that CBS was adding significant amount of video to the TV fan-centric site that it acquired as part of last year's CNET acquisition.
Disney had been in talks to join Hulu before the company was formally launched by NBC U and News Corp. in March 2007, but the Mouse wanted to see how the service developed before diving in. In partnering with Hulu, Disney is acknowledging that there's opportunity to reach many more viewers by spreading its online content beyond Disney-owned websites. Last year the Mouse did a limited vid distrib deal with AOL and Veoh, and it more recently cut a vid-sharing agreement with YouTube for ESPN content (
Daily Variety, March 31).
In February, Hulu edged past Yahoo to become the No. 2 Web video site behind YouTube. In March, Hulu served up some 348 million video streams and had a unique user base of 8.9 million, according to Nielsen VideoCensus stats. ABC.com, the big driver of the Mouse's Web streaming activity, had 176 million streams and 6.9 million uniques.
Mouse's research found little overlap between Hulu and ABC.com users. According to Disney's Sweeney, only 8% of ABC.com users also spend time on Hulu, while only 13% of Hulu's aud visits ABC.com.
"We found that all of the network sites are performing well, but they're really super-serving their core viewers -- people who would naturally be inclined to go to a network's website," Sweeney said. "But we're seeing very fast growth in casual viewing online through these big online video aggregators (like Hulu), and that's something we hadn't tapped into yet."
Among the other shows slated to be made available on Hulu are ABC's "Ugly Betty," "Dancing With the Stars," "Private Practice" and "Jimmy Kimmel Live"; ABC Family's "Secret Life of the American Teenager"; Disney Channel's "Wizards of Waverly Place"; and a range of ABC and Disney library product.
Contact Cynthia Littleton at
cynthia.littleton@variety.com