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Apple/Hulu tie-up: Don’t bet on it

By
Dan Mitchell
Dan Mitchell
By
Dan Mitchell
Dan Mitchell
July 22, 2011, 2:37 PM ET
An evil plot to destroy the world. Enjoy! (Log...
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FORTUNE — It seems safe to assume that Apple is kicking Hulu’s tires mainly so it can get a look at the books of a company that will likely be purchased by a competitor. Apple (AAPL) will probably not end up buying the video streaming company.

It’s an intriguing notion, however. Apple wants to be a major player in Internet video, where most of its efforts to replicate its success with music have fallen short. Hulu would also enable Apple to put itself squarely into another where it has faltered: online advertising.

Bloomberg News reported late Thursday that Apple is “considering” making a bid for Hulu, which has already attracted interest from Yahoo (YHOO), Amazon (AMZN), AT&T (T) and others.

GigaOM’s Ryan Lawler lists several good reasons that an acquisition seems unlikely. 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,” he says. Which is true, but only if Apple doesn’t eventually rebrand Hulu in its own image, which it eventually would.

But the main thing, Lawler points out, is that “Hulu wants to be everywhere” while “Apple wants to control its own ecosystem.” So, would Apple make Hulu available for Android (GOOG) devices, for example? That would certainly be an unusual move for Apple, but it’s not out of the question. What Hulu “wants” would be irrelevant once it’s part of Apple. Still, reconciling Hulu’s and Apple’s disparate strategies would be a pretty big undertaking.

It might be worth it for Apple just to try. There’s not much risk involved, after all. At $2 billion, Hulu’s highest reported valuation (though Bloomberg reports that Hulu’s price “could exceed” that figure), an acquisition would deplete Apple’s enormous cash reserve of $76 billion by less than 3%.

And for that, Apple would instantly become a force in online video, with rights to stream content – for two years, exclusively — from some of the biggest media companies in the world.

About the Author
By Dan Mitchell
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