Secret memo details Hulu 'transition plan'

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A three-page confidential internal memo distributed within Hulu shows that the online video purveyor is prepared for a "transition plan" that may or may not include current CEO Jason Kilar, if he decides to take a potential big payout and leave in September.

CEO Jason Kilar Hulu

Kilar

The July memo "covers a range of sensitive issues pertaining to how two of Hulu's parent companies, News Corp and Disney, plan to transform the streaming service," said a story in Variety, which obtained a copy of the memo. While the publication said neither Hulu reps nor anyone from the managing partners would comment on the plan, "multiple sources" said that the memo reflects "contingency planning" in the event Kilar steps down.

The possibility the CEO would leave has intensified as a management buyout of Hulu owner Providence Equity Partners nears closing in September. In addition to paying off Providence's initial $100 investment in the firm, that buyout also would allow any Hulu executive "with a significant number of vested shares" to cash out. For Kilar, this could mean a payday of $100 million which is enough money to send partners Walt Disney Co. (NYSE: DIS) and News Corp. (Nasdaq: NWSA) (Comcast [Nasdaq: CMCSA] has a piece of Hulu as well, but no say in the company's management) looking at what happens next. Sources told Variety that no search committee has been formed nor have other candidates been approached for the job.

A second part of the buyout will change the ownership structure and "precipitate significant adjustments to the content licensing agreements" Hulu has with next-day primetime programming from News Corp. and Disney. Unwelcome changes there push Kilar toward the big payday and departure.

Kilar, who also declined to comment on the story through a Hulu spokesperson, has been said to want to finish the job he started when he joined Hulu in 2007. He has the support of News Corp. and Disney, which issued a statement calling him "an outstanding CEO" and saying that the partners "look forward to Jason and Hulu continuing to expand Hulu's reach and deliver increasing value in the future."

What that future will look like, though, without Providence and with the potential need to cater more directly to advertisers and distributors is what probably instigated the memo.

Aside from the impact on Kilar--and other high-ranking execs who should be salivating at a big payday in September--the memo showed that Disney and News Corp are none too ex cited about Hulu's expansion into Japan, inferring that News Corp. wants to limit its investment to $30 million and Disney "would like to discuss a less ambitious product which requires less capital investment but which could prove to be good business," the story said. According to the memo, Hulu is looking at other markets, including a launch in Australia, but the partners have no interest in a move into India.

The story also pointed to an "interesting disparity" in the way Disney and News Corp. view authentication. News Corp. wants to maintain and eight-day delay on programming availability to non-MVPD viewers; Disney doesn't.

The biggest question surrounding Hulu, and the biggest reason for the memo, is what's going to happen with Kilar. On that point, the story is conflicted.

Kilar stands to make $100 million if he walks; he stands to continue to build a company he's been with for barely five years. Money does a lot of talking but, when it came to walking earlier this year, Kilar quickly stepped away from any reports that he would move into the top post at Yahoo!

Nevertheless, the Variety story concluded, "His owners remain concerned he has enough money coming to launch a new vision elsewhere."

For more:
Variety has this story

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