Ever since the Walt Disney Company purchased 20th Century Fox, there has been a huge question mark hanging over the future of Hulu. As Comcast still have a 33% stake in the company, though Disney has operational control over the streaming service following a deal made shortly after Disney purchased it, that means as early as January 2024, Comcast can require Disney to buy NBCUniversal’s interest in Hulu and Disney can require NBCUniversal to sell that interest to Disney for its fair market value at that future time. Independent experts will assess Hulu’s fair market value, but Disney has guaranteed a sale price for Comcast that represents a minimum total equity value of Hulu at that time of $27.5 billion.
Since 2019, many things have changed in the streaming world, Disney+ has become a juggernaut with over 150 million subscribers worldwide, and Comcast has launched its own streaming service, Peacock.
According to CNBC, Comcast executives are in no rush to sell their share of Hulu back to Disney, though the executives are planning on Disney buying them out eventually.
When Disney originally purchased 20th Century Fox, Comcast tried to buy Hulu from Disney, but Disney dismissed the idea, as it didn’t want to hand Comcast a successful streaming service, especially since Disney+ hadn’t launched yet.
Hulu currently has over 46 million subscribers in the United States and has continued to grow during the pandemic, but that decision not to sell, might have been a mistake, as Neil Begley, an analyst for Moody’s Investors Services, recently said:
“I think if Disney could roll back the clock today, I’m not so sure they would enter into that deal. Disney has this huge bill to pay in 2024 at a time when they’re already investing a lot of money into Disney+.”
With Disney’s plan to launch a new ad-supported tier to Disney+ in December, this will mean Disney+ will be able to increase the amount of money it makes per user and put it on par with Hulu, which makes almost twice as much per subscriber than Disney+.
Comcast executives value Hulu as “significantly higher” than $27.5 billion, possibly up to $50 billion. So it’s in Comcast’s interests to hold off on selling its share to Disney, in the hope that the value of Hulu increases.
However, with Disney+ set to get an ad-supported tier and more general entertainment offerings, Disney could start to move more titles, over to Hulu, as it has done with “Love, Victor” and “The Orville”. Comcast is also doing this with its NBC and Bravo titles, which will be moving to Peacock later this month.
The streaming world is starting to shrink, as this past week Showtime has been added into Paramount+, and following the merger of Warner Brothers and Discovery, we will see HBO Max and Discovery+ merge together into a brand new streaming service in 2023.
Many have speculated that once Disney gains full control over Hulu, we could see Hulu and Disney+ merge together. Internationally, Disney+ has already added a vast collection of general entertainment offerings, many of which have been released as Hulu Originals in the US. As Disney decided to focus on building a single streaming service, abandoning any plans to launch Hulu internationally, as that would have also increased the value of Hulu, which Disney doesn’t want.
Recently, investor Dan Loeb’s Third Point Capital bought a new stake in Disney last month and issued a statement asking Disney to sort out the Hulu situation.
“We urge the company to make every attempt to acquire Comcast’s remaining minority stake prior to the contractual deadline in early 2024. We believe that it would even be prudent for Disney to pay a modest premium to accelerate the integration but are cognizant that the seller may have an unreasonable price expectation at this time (while noting the seller has already made the decision to prematurely remove their own content from the platform.) We know this is a priority for you and hope there is a deal to be had before Comcast is contractually obligated to do so in about 18 months.”
Comcast is in a unique situation; it doesn’t necessarily need the cash right now from a Hulu sale and knows holding off. It could get them some money if Hulu’s value goes up. So it doesn’t look like Comcast is in any rush to accelerate Disney’s purchase. It also doesn’t want to give Disney any more leverage in building up Disney+, giving them a chance to build Peacock up even more.
With almost 18 months until Disney can force Comcast to sell its 33% stake in Hulu, we could see some more moves from Disney to try to reduce the value of Hulu, or will Disney manage to convince Comcast to end the deal early?