May 16 (Bloomberg) -- Time Warner Cable Inc., the second-largest U.S. cable-TV provider, is considering taking an equity stake in online-video site Hulu LLC, according to people with knowledge of the situation.
Discussions are at an early stage and a transaction isn’t certain, said the people, who asked not to be identified because the talks are private. Another pay-TV company is also weighing a Hulu bid, said one of the people.
A deal would make New York-based Time Warner Cable a co-owner with Walt Disney Co., News Corp. and Comcast Corp., which each hold about a one-third stake, said the people. Time Warner Cable could offer Hulu to its customers as a bundled service inside and outside of the home with its current products, one of the people said. The company is focusing more on its broadband business as traditional pay-TV growth stalls.
Ownership in Hulu would open the door to more ad revenue at Time Warner Cable and, eventually, could help the cable company transcend regional limits to its growth. Hulu also would potentially improve the company’s access to local advertisers, a group it has targeted.
“Hulu’s a great asset,” said Rich Greenfield, an analyst with BTIG LLC in New York. “Conditions like a national footprint will seem silly 10 years from now.”
Meredith Kendall, a spokeswoman for Los Angeles-based Hulu, declined to comment, as did Justin Venech at Time Warner Cable.
Having its cable rival as a partner could also allow Philadelphia-based Comcast, the biggest cable-TV service, to piggyback on any deals Time Warner Cable makes with Hulu. Comcast agreed not to make management decisions at Hulu as part of its January 2011 purchase of NBC Universal.
Hulu, which surpassed 4 million paid customers for its $7.99-a-month service in the first quarter, is seeking to double the number of advertisers this year as it targets local businesses, Jean-Paul Colaco, senior vice president of advertising, said this month.
“It’s the best brand for streaming television,” David Bank, an analyst at RBC Capital Markets in New York, said in an interview. He said ownership of Hulu would help Time Warner Cable control online distribution of video.
Time Warner Cable fell 2 percent to $97.22 at the close in New York. The shares are little changed this year.
Hulu’s board reached out to potential strategic buyers, people with knowledge of the situation said in March. Its controlling owners, Burbank, California-based Disney and Rupert Murdoch’s New York-based News Corp., disagree on Hulu’s future direction and discussed one partner buying out the other’s stake, people said in March.
Former News Corp. Chief Operating Officer Peter Chernin, who helped found Hulu, offered at least $500 million, people with knowledge of the situation said last month. Yahoo! Inc. Chief Executive Officer Marissa Mayer met with senior executives of the online television service, people said this month.
Amazon.com Inc. and Guggenheim Partners LLC have also expressed interest, people familiar with the situation have said.
Dow Jones reported Time Warner Cable’s interest earlier.