As Disney prepares to buy out the rest of Comcast’s stake in Hulu by 2024, top executives at the two companies have increasingly made their negotiating tactics public as they weigh up the streaming service’s value.
Speaking to a crowd of investors in San Francisco on Sept. 14, Disney CEO Bob Chapek said he’d rather integrate Hulu into Disney+ “sooner” than later, but would require “reasonable terms” from Comcast, which still owns it. owns a 33 percent stake in the streaming service.
“We need to fully own Hulu to integrate it into Disney+. We’d like to get to the end point sooner, but that obviously requires a certain amount of inclination for the other party to have reasonable conditions to get there,” Chapek said. “And if we could get there, I’d be happy to try to to facilitate that.”
Meanwhile, Comcast CEO Brian Roberts came back with the idea that the telecommunications company, which owns NBCUniversal and Peacock, might want to buy out Disney’s majority stake and own Hulu itself — though the odds that Disney will sell one of its major streaming assets, is highly unlikely.
“Hulu is a phenomenal company,” said Roberts. “It’s got great content, and I believe if it were up for sale, Comcast would be interested — and so would a lot of other tech and media companies. And you’d have a robust auction.”
The salvo quotes, which were picked up by news outlets and on social media, served as a preview of the ongoing Disney-Comcast negotiations over Hulu that first began in 2018.
Disney originally became an investor in Hulu in 2009 and later retained majority ownership after acquiring the entertainment assets of 21st Century Fox, which had a founding interest in Hulu. But the acquisition did not come without competition; Comcast had also made a $65 billion bid for 21st Century Fox in 2018, forcing Disney to increase its bid from $52.4 billion to $71.3 billion to seal the deal. Comcast, cutting its losses, withdrew its Fox offer to focus its attention on acquiring British broadcaster Sky and beating Disney in that negotiation process.
But Comcast never completely turned away from Hulu. Telecommunications company executives reportedly approached Disney about buying Hulu from Disney as part of its 2019 Fox acquisition, but Disney — which had a 66 percent stake in Hulu after the Fox deal — was not interested.
Instead, Disney and Comcast, NBCUniversal’s parent company, entered into a put/call agreement in May 2019. The agreement stipulated that as early as January 2024, Comcast could require Disney to buy out NBCUniversal’s stake in Hulu, and that Disney could demand NBCUniversal. to sell its stake to Disney for its “fair market value at the time,” according to a press release issued at the time.
At the time of sale, independent experts will assess Hulu’s fair market value. Disney has guaranteed a sale price that would value Hulu at a minimum of $27.5 billion and make Comcast’s stake at least $9 billion.
However, since the deal with Comcast closed, streaming valuations have fallen and the market has gained more control in the face of slowing subscriber numbers at giants like Netflix. That could be one reason why Roberts is trying to increase the value of his Hulu stock, analysts say, although it’s unclear how much that will actually play into his monetary determination.
This is the first time the two sides have publicly argued over the stakes, but according to a 2021 report in The information, Disney and Comcast have argued privately over Disney’s decision not to launch Hulu abroad, but instead opt for the Star general entertainment streaming brand, and have taken the case to arbitration. Comcast had argued that expanding the platform internationally would increase not only its scale, but also its value, the report said.
Comcast already has a streaming service on NBCU’s Peacock platform, which has seen stagnant numbers for paying subscribers (around 13 million) and has not yet reached a level to seriously compete with Netflix or Disney+. Roberts clearly sees Hulu, which has a high average revenue per user and an established subscriber base, as a means of broadening Peacock’s library and bringing in more subscribers, moving the platform to more of a level one state. However, achieving that status also requires a larger and ongoing investment in content, and it’s unclear whether Comcast is willing to do so, according to Moody’s analyst Neil Begley.
While Disney may not necessarily need Hulu to fuel future growth, the company has already agreed to the deal with Comcast; Hulu serves as a major offering in Disney’s streaming bundle that includes Disney+ and ESPN+ and, as mentioned earlier, delivers an average monthly revenue per user that is currently more than double the amount for Disney+ in the US and Canada, just for its SVOD level.
As for shifting the timing, Disney has focused on getting its balance sheet back to where it was before the pandemic, including share buybacks, and Chapek may want to close this deal sooner or later, to refocus on That.
“By doing this transaction, it takes them longer to do the things they probably want to do,” Begley said.
Once this deal was finalized, Roberts indicated that he would continue to compete with Disney in other ways.
“Obviously there’s another company, Disney, that has a fantastic park business. We are gaining market share. The ingenuity and the service and the customer satisfaction, it’s never been better,” said Roberts.