What Yahoo Should Do with Its $8.3B Alibaba Windfall

/ Sep 19, 2014


Ready, get set, go! It is Alibaba IPO time…right now. The Chinese e-commerce giant is set to be the biggest IPO in US history (that’s $22 billion). And, prescient Yahoo, which has long been an investor in the company, is set to get $8.3 billion of it.

But what should Yahoo do with that windfall?

Video — that’s what! Video is Yahoo’s future, plain and simple. With this massive cash infusion, Yahoo now has the means — like never before — to take on YouTube…and potentially big cable operators themselves. The big vision is the massive 1-2 punch of on-demand premium broadcast television and live linear programming, all wrapped with a nice purple bow.

Yes, Yahoo tried to buy its way into the video market via massive M&A before — making bids to acquire Hulu and Dailymotion (an attempt that failed due to French regulators). But that was then, and this is now. Yahoo could go back to Hulu and go for M&A version 2.0.

With that single move, and if it negotiates “right” (getting the content rights it needs), Yahoo would be the differentiated home for the deepest catalog of premium television content — content that YouTube does not have. And Yahoo could significantly ramp up Hulu’s own original programming efforts to further differentiate itself from YouTube and other video platforms. One more ingredient: Yahoo could use some of that cash hoard to woo key tentpole YouTube creators over to its platform, perhaps offering better economics, among other things.

But wait, there’s more. Yahoo could use its significantly expanded war chest to take on cable and satellite bundled services themselves. The studios have accelerated the pace of their “noises” in the past two weeks alone, indicating that they may now be ready to license in an unbundled world. And if Yahoo succeeds in convincing Hulu’s broadcasting partners to play in that world, Yahoo has the potential to offer live linear television programming as well (i.e., a true virtual/OTT MSO).

That would be potent. Yahoo could become the place for both on-demand TV content and live linear programming. The company could also repackage that programming in a myriad of ways — including into “bite-sized” smaller packages that are optimized for mobile viewing.

Now, don’t get me wrong, those are a lot of things that must go “just right” in order to make the big “it” happen.

But, you gotta dream big, right?

And now is the time for Yahoo! to do that kind of dreaming…

Check out more of Peter Csathy’s thoughts on the digital media space at the Digital Media Update.

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