Following Disney purchasing 20th Century Fox, it acquired control of 66% of Hulu, resulting in a deal being made with Comcast, who owns 33%, that in 2024, both companies could force Disney to buy out Comcast’s stake.   Part of the deal is that Hulu has to be independently valued, but at a minimum of $27.5 billion, which means Comcast would get $9 billion.

With less than a year to go until Disney can buy out Comcast’s stake, there have been many questions about Hulu’s future, especially following the latest quarterly financial results call, where Bob Iger said that “everything is on the table” when it comes to the idea of selling Hulu.  Leading to even more speculation that Comcast could potentially buy Hulu, another company could buy Hulu or that Disney eventually merges Hulu and Disney+ together, so it would look more like how Disney+ operates outside of the US.

During a recent Morgan Stanley Technology, Media and Telecom Conference, Disney CEO Bob Iger took part in a Q&A session with Ben Swinburne from Morgan Stanley, and he was asked about the future of Hulu and its general entertainment content.

Well, one path that we know is right, because of the success that we’ve had already, although as we’ve talked, we have to get that to — we have to turn it into a profitable business as Disney+ and that branded play, which is highly differentiated, highly, and it gives us an ability to both price more aggressively, sell more aggressively in terms of advertising, and market more effectively too, because those brands have such built-in marketing equity already.

When you think about, I’ll call it, non-branded or undifferentiated, obviously, then you immediately lead to Hulu, Alexia Quadrani, who’s our Head of Investor Relations, gave me a synopsis, yesterday, I think of what all the different companies that are in streaming have been saying lately. Every one of them is going to be highly profitable in a couple of years and grow subs by the tens of millions.

There are six or seven basically well funded, aggressive streaming businesses out there, all seeking the same subscribers in many cases competing for the same content. Not everybody’s going to win.

So what we’re doing right now is we own two-thirds of Hulu, and we have an agreement with Comcast that may result in us owning 100%, is that we’re really studying the business very, very carefully, all those competitive dynamics with an understanding that we have a good platform in Hulu. We have very strong original programming, actually highly awarded original programming, some delivered by FX, which is a great not only producer but brand. And we also have a good library. So it’s a solid platform, and it’s also a very attractive platform for advertisers. It’s already proven to be valuable for them, and advertising has proven to be valuable for us.

But the environment is very, very tricky right now. And before we make any big decisions about our level of investment, our commitment to that business, we want to understand where it could go. The whole streaming business other than Netflix, which is relatively mature, it’s a nascent business for most of us. And we’re also at an interesting point in the world from a media perspective where a lot of people are still getting linear programming or consuming media on traditional platforms.

And while I think I’ve said publicly that the future of linear I don’t believe is very bright and eventually, I think everything will migrate to streaming, we’re not quite there yet. And so, you have erosion of a traditional platform and its economics and some growth in the new platform but not the kind of compelling growth that we’ll all need to be profitable. And I think it’s just a tricky period of time.

The biggest problem for Disney right now is Hulu.  It’s in a catch-22 situation, in that it can’t heavily invest in the platform, as that would increase the value of the company, which is why it never launched internationally and if Hulu isn’t going to be part of Disney’s future after next year, it can’t say anything if there is a sale going on and negotiations are underway with other companies like Comcast.   For the time being, we are likely to see a cautious approach to talking about the future of Hulu.  During the interview, Bob also talked about the difference in general entertainment and how they are looking to the future:

Well, what we’ve talked about, and I think we’re going to get there regardless of what happens with Hulu, is that I think we have to get much more judicious in terms of not just how much we’re spending, but what we’re spending it on. There is so much consumer choice right now and it comes back to what can — what is differentiated. One thing, obviously, we talked about those brands, Star Wars and Marvel and Disney and Pixar, for instance, but our quality is also our differentiated. I think HBO proved that well in their halcyon days when high-quality programming made a big difference to them and not volume. And because the streaming platforms require so much volume, one has to question whether that’s the right direction to go or can you be more curated, more basically — I used the word judicious a few times but I guess more picky about what you’re making and concentrate on quality and not volume. That’s what I talk about.

It’s very interesting how Bob Iger referenced HBO, being a premium brand for mature general entertainment and how it is focused on quality over quantity.  In many interviews this year, Bob Iger has called out FX as being a major part of their television business, so it wouldn’t surprise me, if Disney starts to lean more heavily on FX in the future as being its mature brand.

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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: Twitter: Facebook:

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