Popular U.S. Web video service Hulu is prepared to raise as much as $300 million in an initial public offering likely to be led by Morgan Stanley, sources familiar with the matter told Reuters, publisher of Buyouts.
Hulu—which is backed by General Electric Co.’s NBC Universal, Walt Disney Co., News Corp. and private equity firm
Tapping public markets is one of several options under consideration as Hulu, which offers shows such as “Glee” and “Modern Family” over the Web, girds for battle against fast-moving rival Netflix, and better financed big technology companies Google Inc. and Amazon.com Inc.
Other options include attracting other media companies to contribute new programing or raising more money from existing partners, another source said.
A decision could come by November, the source said, adding that the offering is contingent on the renewal of rights to carry shows, some of which expire in a year.
The online video service was launched three years ago as an ambitious attempt to harness the explosive growth in online video viewing.
The worldwide online video market is expected to hit $16.1 billion through paid and ad-supported services by 2012, according to ABI Research, which tracks media trends.
Hulu is now the second-largest Web video service in the United States behind Google’s YouTube.
But with fresh assaults from Google, which secured content deals with Time Warner for its new Google TV service, and Amazon.com, which is considering a subscription video service of its own, Hulu has found itself racing to fill up its coffers to pay for more content.
Apple Inc., which views the television business as a “hobby,” considered launching a lower-cost subscription TV service, but faced resistance from program owners. It launched a $99 Apple TV device that lets customers rent videos instead.
Hulu has operated a free service, but began testing a subscription video service that offers more shows for mobile devices, game consoles and TV sets in June.
Hulu was not immediately available for comment.
News Corp., Walt Disney, NBCU, Morgan Stanley and Providence declined to comment.
Filing by the end of the year gives Hulu the flexibility to push an IPO out in January or February if the new issue market improves, but also lays the groundwork for an offering in April or May, after first quarter results have given it more time to gauge its financial health and the market, people familiar with the plan said.
Banks including Goldman Sachs, Bank of America and JPMorgan in August pitched to lead the offering.
It is unclear if any banks have officially been mandated, but several people said that Morgan Stanley, at least unofficially, has been given the nod for the lead slot.
It has not yet been decided how many IPO shares will be new and how many will be sold by current stakeholders.
The offering is too small to provide much liquidity to shareholders, one source said. Proceeds from the offering are expected to be used to bring new shows to the subscription service, a separate source added.
Clare Baldwin is a Reuters correspondent in New York. Nadia Damouni, Jennifer Saba, Megan Davies, Paul Thomasch, Sue Zeidler and Yinka Adegoke also contributed reporting.