Before Disney purchased 20th Century Fox in 2019, Hulu was owned by Comcast (30%), Fox (30%), Disney (30%) and Warner Brothers (10%).  So when Disney brought 20th Century Fox, it acquired an additional 30% stake in Hulu, resulting it Disney owning 60% of the streaming service, which shifted the balance within the streaming company.

A contract was made between Comcast and Disney, that would mean Disney would will assume full operational control of Hulu, effective immediately, in return for Disney and Comcast entering into a “put/call” agreement regarding NBCUniversal’s 33% ownership interest in Hulu. Under the put/call agreement, 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. Hulu’s fair market value will be assessed by independent experts but Disney guaranteed that a sale price for Comcast that represents a minimum total equity value of Hulu at that time of $27.5 billion.

Disney and Comcast agreed to fund Hulu’s recent purchase of AT&T Inc.’s 9.5% interest in Hulu, pro rata to their current two thirds/one third ownership interests and, going forward, Comcast will have the option but not the obligation to fund its proportionate share of Hulu’s future capital calls and will be diluted if it elects not to fund. Disney has agreed that only $1.5 billion of any year’s capital calls can be funded through further equity investments with any capital in excess of that annual amount being funded by non-diluting debt. Whether Comcast funds its share of those equity capital calls or not, Disney has agreed that Comcast’s ownership interest in Hulu will never be less than 21% such that Comcast is guaranteed to receive at least $5.8 billion under the put/call agreement.

This agreement has meant that Comcast and Disney have been locked into an agreement until 2024, which has resulted in Disney’s streaming service plans in the US being very different from the rest of the world (except for Latin America), where Disney+ is the only streaming service operating and that it includes more mature content from ABC, FX and 20th Century.

There has been a huge cloud hanging over the future of Hulu. Earlier this year, Disney CEO Bob Iger spoke about everything being on the table for Hulu, and Comcast’s CEO said he was expecting a big cheque from Disney for their share of Hulu.

With 2024 only about six months away, Disney has finally started laying out its plans for Hulu, as Bob Iger revealed during a quarterly financial call that they would soon begin offering a one-app experience domestically that incorporates Hulu content via Disney+.   However, Disney will continue to offer Disney+, Hulu, and ESPN+ as stand-alone options.  Disney will begin rolling out this one-app offering by the end of the calendar year, and will be revealing more details in the future.

The announcement of Hulu being offered within Disney+ now indicated that Disney is going to be pushing ahead to buy out Comcast’s stake in Hulu, which is why the wording of how all of this is going to work sounds a little vague, because until Disney fully owns Hulu, they can’t fully merge it in with Disney+.  Bob Iger did reveal more details on the purchase of Hulu during the conference call:

As you know, we have a contractual arrangement with Comcast that will enable them to put their share of Hulu back to us in early 2024 — starting in early 2024. There’s a, I guess, further right that we have to call their share from them. And it’s not really been fully determined what will happen in that regard except that, as we look more and more at the growth of — or the future of our streaming business — and I mentioned at the first earnings call that I did after I came back that everything was on the table And, in fact, everything was on the table. But I’ve now had another three months to really study this carefully and figure out what is the best path for us to grow this business.

And it’s clear that a combination of the content that is on Disney+ with general entertainment is a very positive, is a very strong combination from a subscriber perspective, from a subscriber acquisition, subscriber retention perspective, and also from an advertiser perspective. So, where we are headed is for one experience that would have general entertainment and Disney+ content together for the reasons that I just described. How that ultimately unfolds is, to some extent, in the hands of Comcast and in the hands of a — basically, a conversation or a negotiation that we have with them. I don’t want to be in any way predictive in terms of when or how that ends up.

I can say we’ve had some conversations with them already. They’ve been cordial and they’re aimed at being constructive, but I can’t tell you and I can’t really say where they end up, only to say that there seems to be real value in having general entertainment combined with Disney+. And if, ultimately, Hulu is that solution, that’s we’re — we’re bullish about that.

We will no doubt hear more on the purchase of Comcast’s stake in Hulu later in the year, but now it’s very clear, Disney is going to be buying out Comcast’s stake, and Hulu’s future within Disney+ has become more than just a dream for US subscribers.

What do you think of Hulu moving within Disney+?  Let us know on social media!

Roger Palmer

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. Email: Roger@WhatsOnDisneyPlus.com Twitter: Twitter.com/RogPalmerUK Facebook: Facebook.com/rogpalmeruk

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