When the Walt Disney Company purchased 20th Century Fox in 2019, it acquired a further 30% stake in the US streaming service, Hulu, and shortly afterwards, Disney and Comcast came to an agreement with regard to the future of the company, with Disney taking over the day-to-day operations of the streaming platform, since it had 66% of Hulu. And as part of the 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 has guaranteed a sale price for Comcast that represents a minimum total equity value of Hulu at that time of $27.5 billion. It was also agreed that Hulu would buy out AT&T’s 10% stake in the company.
Other aspects of the contract meant that Comcast had the option but not the obligation to fund its proportionate share of Hulu’s future capital calls, which 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. Another factor in the deal, was that NBCUniversal was able to terminate most of its content license agreements with Hulu earlier this year.
Over the past year, this contract between the two companies has become much more of an issue, especially as Disney wants to sort out its streaming service division, either by expanding Hulu, merging with Disney+ or even potentially selling it. Former Disney CEO Bob Chapek had indicated he would like to buy out Comcast’s stake “earlier,” rather than later, but only if Comcast offered “reasonable terms.”
With Bob Iger returning to lead Disney, Hulu remains one of the biggest issues for him to fix, as Disney can’t move forward with its plans for streaming in the United States, until it does so. Many analysts have called on Disney to either sell Hulu to Comcast, since the Hulu + Live TV product, fits more naturally with Comcast, or just get a deal done as soon as possible, so it can unify Hulu and Disney+, similar to how Disney+ operates outside the United States, to offer a full streaming service to rival Netflix and Amazon Prime, with content for all ages.
But Comcast knows this. During a recent investors calls, NBCUniversal CEO Jeff Shell addressed the contract between Disney and Comcast, stating:
“We think it’s worth a lot of money because it’s sold on a full-control basis, as if you were auctioning it off. And I think there’s no indication that anything else is going to happen than Disney writing us a big check for the asset in ‘24,”
It’s possible that Comcast and Disney are able to have talks to end the stalemate over Hulu, but ultimately, Comcast knows it has the upper hand, as it just wants the most amount of money it can get, and it doesn’t matter how long it takes to sort it. So it does look like we might have to wait a while for this whole situation to be sorted, since Disney is going to do its best to try to lower the value of Hulu (which is why Hulu never launched globally).
It looks like the battle between the CEOs over the future of Hulu is going to start picking up more steam as we get closer to 2024.
What do you think Disney and Comcast should do over Hulu? 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.