In November, Disney and Comcast will look to finally resolve their ownership of the streaming juggernaut Hulu, as when Disney purchased 20th Century Fox in 2019, it acquired an additional third of the streaming service, resulting in a deal being made between Disney and Comcast, where Disney would gain operational control over Hulu and in 2024, either company could force Disney to buy out Comcast’s stake in Hulu.
Last month, it was revealed that the two companies had agreed to pull forward the pull/put date on the contract by two months, as both companies want to get the situation resolved, since Disney is planning on integrating Hulu into Disney+ to become a larger streaming service to compete with Netflix, Max and Amazon Prime, while Comcast wants some money!
Back when the original deal was signed between the two companies, it stated that Hulu was given a minimum valuation of $27.5 billion and Comcast’s 33% stake of Hulu could be decreased to no less than 21%, if it didn’t continue to invest in the streaming service. But based on the minimum valuation and Comcast still owning 33%, most are expecting Disney to have to pay around $9 billion for the stake in Hulu.
Both Disney and Comcast have hired investment banks to value Hulu. Disney has hired JPMorgan Chase to value its streaming service, while Morgan Stanley will do the same for Comcast. The two valuations will then be compared, and if they are within 10%, the average of the two banks’ determinations will be the price at which Hulu is valued, as of September 30th 2023. If they are far apart on their valuation, a third company will be brought in to come up with a final price.
Over the past year or so, Comcast executives have been trying to pump up the value of Hulu, saying it’s worth much more than the initial valuation, while Disney has been downplaying the value of Hulu, since it believes most of the value is in its own content from studios like FX, ABC and 20th Century, which Hulu doesn’t own and the benefits Hulu has from being linked to ESPN and Disney+. Ultimately, Disney wants Hulu to be worth less, while Comcast want it to be worth more, hence why third parties are involved to reach a valuation, as the two would never agree on a final number.
According to a recent analysis by Seeking Alpha, they believe that Hulu is worth much higher, at around $45 billion, which means Comcast’s stake could be worth close to $15 billion. Seeking Alpha believes that since 2019, Hulu has been able to grow its subscriber numbers by over 23 million and also drastically increase its average monthly revenue per subscriber during that period with more advertising and price increases, especially with its Live+TV option.
With Disney announcing plans to bring together Disney+ and Hulu, Seeking Alpha believes a deal is going to happen soon and that the boost of cash from the sale of Hulu will really benefit Comcast.
However, many other analysts have previously valued Hulu much lower, since trying to compare Hulu to Netflix isn’t a straight comparison. If Disney sold Hulu and removed all its content and bundling options, Hulu would be worth considerably less. And internationally, Hulu hasn’t been expanded, since Disney added all of its general entertainment into Disney+. This model has proven to be a success internationally, which is why Disney wants to use it in the United States. Plus, it would offer many cost-saving benefits, reduce churn, offer more variety, and with more consolidation taking place within the streaming business, as people pull back on how many different subscription services they have, a combined Hulu and Disney+ would allow Disney to be one of the biggest streaming platforms in terms of subscribers and content.
Disney has previously stated that it has credit and assets available to purchase the remaining stake in Hulu, but it is also currently in talks to sell assets in India for a potential $10 billion, some of its ABC local networks and linear channels for billions and also trying to find a partner to buy into ESPN. All of which could help Disney offset the cost of buying out the remainder of Hulu from Comcast.
Ultimately, with both JPMorgan Chase and Morgan Stanley currently working out the valuation of Hulu, should the two be far apart, a third party will be brought in. With Disney set to hold its next quarterly investors call in early November and plans to integrate Hulu content into Disney+ in December, hopefully, it won’t be too long until this situation is finally resolved. But there is no doubt that a deal made over five years ago between Disney and Comcast has continued to have a ripple effect on Disney’s plans and, more importantly, the balance sheet. Since Comcast has continued to drive Disney to overpay for those 20th Century Fox assets, which has caused so many issues for Disney.
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Roger has been a Disney fan since he was a kid and this interest has grown over the years. He has visited Disney Parks around the globe and has a vast collection of Disney movies and collectibles. He is the owner of What's On Disney Plus & DisKingdom.