Disney Will Take Full Control of Hulu With $8.6B Deal
Disney Takes Full Control of Hulu in $8.6 Billion Deal with Comcast
Disney has reached an agreement to acquire Comcast’s remaining 33% stake in streaming service Hulu for approximately $8.6 billion, giving the media giant full ownership and control of the popular streaming platform.
Overview of the Deal
Disney will pay Comcast at least $8.6 billion by December 1st, 2023 for its stake in Hulu. This represents Comcast’s share of the guaranteed minimum valuation of $27.5 billion that was set for Hulu when Disney and Comcast first struck their deal in 2019.
The final purchase price could end up being higher depending on the outcome of an independent assessment to determine Hulu’s fair market valuation as of September 30, 2023. If Hulu is valued higher than the $27.5 billion floor, Disney will pay Comcast the difference.
This appraisal process is expected to be completed sometime in 2024. Disney said “While the timing of the appraisal process is uncertain, we anticipate it should be completed during the 2024 calendar year.”
Comcast’s sale of its remaining Hulu stake was widely expected, as the two companies’ 2019 agreement included provisions that allowed either side to compel the other to buy/sell Comcast’s minority share starting in 2024. They recently moved up that timeline to begin the sale process in late 2022.
Background on Hulu and Its Ownership
Hulu launched in 2007 as an ad-supported streaming service offering current seasons of TV shows from its studio owners, which originally included NBCUniversal, Fox, and Disney.
Over time, Hulu expanded into original programming and live TV streaming. It now has around 48 million total subscribers.
Disney gained a controlling stake (66%) in Hulu after acquiring 21st Century Fox’s 30% share as part of the $71 billion Fox deal that closed in 2019.
Comcast retained its original 30% share of Hulu after the Fox deal, making it an unusual co-owner alongside rival Disney.
Why Disney Wants Full Ownership of Hulu
There are several key reasons why Disney is moving to take full control of Hulu:
Consolidate streaming services: Disney sees Hulu as vital to its direct-to-consumer streaming strategy. Owning it outright will allow Disney to more tightly integrate Hulu with its other streaming services like Disney+ and ESPN+.
Increase revenue opportunities: Fully owning Hulu gives Disney more flexibility to generate advertising and subscription revenue, including bundling offers.
Content synergies: Disney can more seamlessly leverage its content engines like Marvel, Pixar, and 20th Century Studios to supply Hulu with programming.
Global expansion: Disney has plans to expand Hulu internationally, which is easier to execute with 100% ownership and no co-owner conflicts.
What This Means for the Future of Hulu
Disney’s acquisition of full control over Hulu could significantly impact the service’s future direction:
Potential merger into Disney+: Disney may opt to combine Hulu’s content library and subscribers into its flagship Disney+ service, creating one unified streaming app.
More adult programming: With no co-owner, Disney can lean further into Hulu as its home for adult-oriented and R-rated programming not suited for Disney+.
Pricing changes: Disney could raise prices on Hulu subscriptions or bundle offers to increase revenue.
International launch: Hulu could see a broad international rollout now that Disney has untethered ownership and can launch it globally.
Impact on the Streaming Landscape
Disney’s full acquisition of Hulu shakes up the increasingly competitive streaming industry:
Strengthens Disney’s position: Solidifies Disney as a dominant force in streaming with full control over the popular Hulu service and its 48 million subscribers.
Puts pressure on rivals: Puts more pressure on competitors like Netflix, Amazon Prime Video, HBO Max and Peacock to keep pace with Disney’s expanding streaming empire.
Tests appetite for M&A: Serves as a test of the market’s appetite for major streaming mergers and acquisitions as consolidation talk heats up.
Brings closure: Finally resolves the long-running question of Hulu’s future ownership between Disney and Comcast.
The deal provides Disney with complete ownership of a strong streaming asset in Hulu. However, it also comes at a significant upfront cost of at least $8.6 billion.
Disney has said its balance sheet remains strong, with $11.5 billion of cash on hand as of July 2022 and access to $10.5 billion in credit facilities if needed.
The final purchase price could rise above $10 billion based on Hulu’s valuation, putting more pressure on Disney’s finances.
Long-term, Disney is betting it can leverage Hulu to drive higher revenues and profits from streaming to justify the substantial investment.
Overall, Disney’s full acquisition of Hulu represents a major power play in the increasingly high-stakes streaming video landscape. With Hulu fully under its control, Disney can more aggressively position the service as a key part of its direct-to-consumer future as it battles deep-pocketed tech and media rivals.