Ever since Disney purchased 20th Century Fox, there has been a huge cloud hanging over the future of Hulu, in which Comcast owns a 33% stake in.
An agreement between the two companies was made in 2019, which allowed Disney to have operational control over the streaming platform and that in 2024, either company could force Disney to buy out Comcast’s stake. Hulu will have to be valued by an independent company, though the agreement in 2019 valued Hulu at a minimum price of $27 billion, so the least Comcast would get in 2024 would be around $9 billion, though there was a clause in the contract that stated if Comcast didn’t continue to fund Hulu, its stake would drop down to a minimum of 21%, which was valued at $5.8 billion.
Earlier in the year, shortly after Bob Iger returned as the CEO of Disney, he spoke about everything being on the table with regard to Hulu, indicating that he could be putting it up for sale, rather than buying out Comcast’s stake. Since then, Bob Iger has announced a complete U-turn, revealing in May that now the plan is to merge Disney+ and Hulu into one in the United States; starting later this year, Hulu content would be available within Disney+, as part of a one-app experience for subscribers to the Disney Streaming Bundle.
Recently during an interview with CNBC, Bob Iger reconfirmed this would be happening and that Disney would be buying out Comcast’s stake. He would like to do it before 2024, and since Hulu will still be available separately from Disney+, they can begin the merger of the two platforms.
Part of the work I’ve been focused on over the last seven months is understanding all of these businesses, where they are today, and where they could go and which businesses are going to throw off the most shareholder value for this company and its shareholders over time. When I came back, I was open minded about Hulu because there is this agreement with Comcast that actually calls for a transaction of their stake to us right in sometime in 2024. And I didn’t want that to be an automatic. I wanted to look at that objectively. I spent a lot of time looking at that as part of the future of our streaming business, and ultimately concluded that we would be better off having Hulu than not having Hulu. And in fact, the plan is for Hulu to be available starting the end of this calendar year as part of the Disney+ offering. So in terms of the path to profitability of that business, which obviously has tremendous amount of focus on and a lot of attention, combining Hulu and Disney+ is a major step in that direction.
This is likely to be similar to how Paramount+ and Showtime have merged together, rather than how HBO MAX and Discovery+ became Max.
Also, during the interview with CNBC, Bob Iger revealed that he was looking for a strategic partner for ESPN, which has led many to speculate about how this could be. Many minds went straight to Apple, who Disney has recently been working with on the Vision Pro Device and apparently, Disney has also met with the NBA, MLB and NHL regarding becoming a partner. And only earlier this year, Bob Iger restructured the company into three separate sections, Entertainment, Parks & Resorts and ESPN.
But according to Jessica Reif Ehrich, who is the Managing Director for Bank of America, who was speaking on the The Marchand and Ourand Sports Media Podcast. She believes that Comcast could be the most likely partner to become one of the partners in ESPN, which could be part of a deal to basically trade Comcast’s stake in Hulu for some of ESPN.
“The first thing I thought of when he said content distribution, maybe a little bit financial, it just screams one company and that company is Comcast,”
“What Comcast has is very significant distribution, very significant video, very significant broadband, they have a broadcast network. For the NBA, the NFL, for most major sports, they absolutely want to have reach. … This is a company I think that needs to figure out themselves how to get bigger.”
CLIP: Bank of America's Jessica Reif Ehrlich says Bob Iger's comments screams for an ESPN deal with Comcast.
This situation could allow Disney to sort out the Hulu problem once and for all, allowing Disney+ to reach its full potential as Disney’s dedicated streaming platform, which is how it works outside of the US, offering content from 20th Century Studios, FX, and ABC. This general entertainment content has had a huge impact on Disney+ outside the US, with far greater engagement from users and less churn, since there is so much more content available for everyone in a household.
Disney would also not have to pay out any more money following the purchase of 20th Century Fox, and if it continues to sell some of its other linear assets, it might be able to balance the books even further. Depending on how much more Comcast wants to invest in ESPN, there could be additional money there for Disney, or maybe even some other assets (such as Marvel theme park rights on the East Coast of the US), that could sweeten the deal!
Comcast would also greatly benefit from being directly involved with ESPN, such as making sure ESPN is still available on its cable platforms but also potentially incorporating ESPN in with Peacock (and likely Disney+) as a paid add-on, which would help both platforms offer more sports to its subscribers.
Disney and Comcast have done asset trades before, (Oswald The Lucky Rabbit!), and this would allow both companies a way forward, but could they continue to work together?
Do you think Comcast would make a good partner for ESPN? Let us know on social media!
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.