Walt Disney Co. said it will take full control of the Hulu service in a deal with Comcast Corp. as it vies for a bigger piece of the global video streaming market dominated by companies such as Netflix Inc.
Kenneth Li and Vibhuti Sharma of Reuters had the news:
The agreement, which ascribes a minimum equity value to Hulu of $27.5 billion, allows either company to trigger a sale or purchase of Comcast’s 33% stake to Disney as early as January 2024. Comcast has also agreed to fund Hulu’s recent buyout of AT&T’s 9.5% interest in the company.
By establishing an expiration date of five years from now, Comcast is betting the value of its stake will nearly double or more without any more additional financial obligations.
Comcast’s departure from the Hulu board will let Disney prepare unencumbered to expand the scope and reach of Hulu in the domestic and international markets to battle the likes of Netflix, Amazon.com Inc and Apple Inc.
“It is important for Disney to have full control of the direction and content on Hulu,” said Trip Miller, managing partner of Memphis-based hedge fund Gullane Capital Partners, whose funds include Disney shares.
Meg James and Stephen Battaglio of the Los Angeles Times reported that relations with Comcast have been strained:
Hulu is the fourth-largest streaming service in the U.S., behind Google’s YouTube, Netflix and Amazon Prime. Taking full control of Hulu bolsters Disney’s focus on direct-to-consumer distribution of its programming.
For more than a decade, Hulu has been controlled by a triumvirate of entertainment powers: Disney, Comcast’s NBCUniversal and Rupert Murdoch’s 21st Century Fox. The venture became tricky to manage because the three principal owners had separate agendas and, occasionally, conflicting goals. Then, in March, Disney gained the majority stake as part of its purchase of much of Fox.
Disney wanted to call the shots at Hulu, which offers such shows as “The Handmaid’s Tale” and network hits including Fox’s “Family Guy” and NBC’s “Saturday Night Live.”
Relations with Comcast have been strained for more than a year: Comcast Chief Executive Brian Roberts last year jumped into the bidding for Fox, driving up the price that Disney ultimately had to pay. Comcast also wrestled away an asset that Disney wanted: the European television service Sky. Some analysts had wondered whether the Philadelphia cable colossus would stick around in the Hulu joint venture as a fly in the ointment for Disney CEO Bob Iger.
Mike Snider of USA Today reported that the deal is good for consumers:
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. That’s good news for consumers, says Jim Nail, principal business to consumer marketing analyst for research firm Forrester.
The decision signals “no sudden disruption” of what subscribers expect from Hulu, he said. “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’s magic streaming kingdom
With control of Hulu, Disney can eventually offer a customizable bundle of video services direct to homes. Remember, it has a Disney+ subscription service stocked with Disney and Pixar films, as well as Marvel and “Star Wars” movies, due to launch Nov. 12 for $6.99 ($69.99 annually). Current box office smash “Avengers: Endgame” hits the service Dec. 11.
