Disney Finalizes Deal with Comcast to Take Control of Hulu

Comcast, which owns roughly one-third of Hulu, has agreed to sell its stake in the streaming video service to Disney. The deal calls for Comcast to sell its interest for Hulu’s fair market value no earlier than 2024. The Hulu joint venture launched nearly 12 years ago with the goal of providing a legal platform for television content that would serve as an alternative to YouTube and pirate sites. The platform has since become a major Netflix competitor. Disney’s share increased with its recent $71.3 billion purchase of 21st Century Fox’s movie and TV studios. AT&T, which picked up 9.5 percent of Hulu with its $85 billion deal for Time Warner, recently sold back its share to Hulu for $1.43 billion.

Under the terms of the deal, Disney will gain immediate control of Hulu, and will pay Comcast $5.8 billion or more in 2024, depending on possible investments to be made by Comcast during the next five years.

“The sale price would be at least $5.8 billion and could climb once an independent party assesses Hulu’s fair market value,” reports The New York Times. “The potential payout is based on Hulu’s current $27.5 billion valuation (last month, it was valued at $15.8 billion).”

“Perhaps the most important condition of the deal is that NBCUniversal parent Comcast will keep NBC shows such as ‘Saturday Night Live’ and ‘The Office’ on Hulu for five years,” notes USA Today. “That’s good news for consumers, says Jim Nail, principal business to consumer marketing analyst for research firm Forrester.”

The deal suggests “no sudden disruption” for subscribers, said Nail. “It also shows that both NBCU — which, of course, plans to launch its own service early in 2020 — and Disney are being thoughtful about the consumer experience, and will approach future changes cautiously.”

Disney plans to launch its Disney+ direct-to-consumer streaming service featuring “content for families and children, while Hulu is expected to be an outlet for shows aimed at adults,” according to The Wall Street Journal. “After buying most of the entertainment assets of 21st Century Fox, Disney now owns the Twentieth Century Fox library, as well as the FX cable channel, the latter of which is known for edgier fare.”

During an investor conference yesterday, Disney CEO Bob Iger announced the possibility of FX producing original content for Hulu.

Hulu has grown “its subscriber base from 6 million in 2014 to more than 25 million last year,” notes WSJ. While the service is currently not profitable, Disney “said Hulu’s domestic operations would become profitable in either fiscal 2023 or 2024. As part of their deal, Disney and Comcast agreed that future ‘capital calls’ will be funded through a combination of equity and debt. If Comcast doesn’t participate, its stake would be reduced, though never below 21 percent.”

Hulu’s three current products include “the live service that replicates a cable bundle at $45 a month, an ad-free streaming service priced at $12 a month (this one acts most like Netflix) and a $6-a-month streaming service that includes commercials,” explains NYT.

“The $6 offering is Hulu’s most lucrative business. It generates more than $15 in revenue per subscriber each month, because it allows for targeted advertising, the high-cost commercials tailored to individual viewers. Its success suggests that NBCUniversal is on the right track with its plans for an ad-based streaming network.”

NBCU’s upcoming service will be free for cable TV subscribers and available to cord cutters for a subscription fee. Comcast’s agreement to license NBC content to Hulu “can end in three years,” WSJ explains, “and in one year, NBCUniversal will be able to put some of that content on its as-yet unnamed streaming service.”

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Hotstar, Disney’s Indian Streaming Service, Sets New Global Record For Live Viewership, TechCrunch, 5/12/19