Now that Disney has inked a major deal with Comcast to take full operational control of the Hulu streaming service, analysts see upsides for both companies.
“Comcast can smoothly transition to its own streaming service, while retaining the upside in Hulu for the next five years,” Brian Frons, longtime president of ABC Daytime and current UCLA professor, told TheWrap, calling the deal a “smart” move for both sides. “Disney takes control of Hulu now, which allows them to have a unified execution of their digital vision without having to write another acquisition check this year.”
The deal, called a “put/call” agreement, effectively gives Disney the 33% stake in Hulu now owned by Comcast in a transaction that values the streamer at $27.5 billion. 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 — with a guaranteed payout to Comcast of at least $5.8 billion.
“This enables us to run [Hulu] in ways that obviously gives us access to a number of things both strategically and otherwise — there are a number of synergies involved with it,” Disney CEO Bob Iger told the MoffettNathanson Media and Communication Summit on Tuesday shortly after the deal was announced. “First and foremost, it’s the third prong in our direct-to-consumer strategy with ESPN+ and Disney+.”
Disney already has plans for how Hulu will fit in with company’s burgeoning direct-to-consumer streaming ecosystem. With Hulu, Iger said, Disney can manage customers and understand customer data across three very different platforms. He also said it will allow Disney to bundle the three, which he maintains is an important part of Disney’s business, as well provide a benefit in advertising sales.
Iger also touted Hulu as a home for Disney’s more adult-oriented content that simply won’t work on Disney+. R-rated movies like “Deadpool” from the recently acquired Fox and Fox Searchlight libraries, adult-skewing TV shows from Fox and FX like “American Horror Story,” along with ABC News content, are best suited for Hulu — an arm’s distance away from its namesake streaming service, which has been branded with a family focus.
Hulu now has about 27 million paying accounts, all in the U.S. market alone, a foundation built on the success of its Emmy-winning series “The Handmaid’s Tale” and a collection of shows from its network partners, including Comcast’s NBC and Disney’s own ABC.
Disney has said it expects Hulu’s subscriber count to hit 60 million in the U.S. by 2024 — which would still be far less than the nearly 150 million worldwide subscribers that Netflix boasts, but Disney also has a flood of content it can divert to Hulu following its $71.3 billion acquisition for Fox’s film and TV entertainment assets.
By controlling Hulu, Disney now has better control distributing the full scope of its content.
Tuesday’s deal helps lay the groundwork for Hulu to reach Disney’s 60 million subscriber goal, Frons said, but it won’t happen overnight: “That will require a significant programming and marketing spend, which one can imagine in a future that is not necessarily in the next two years, but certainly in the next five.”
Iger has said in the past that it’s important to keep the more adult fare Fox content separate and specifically branded apart from the Disney content.
“This was preordained and inevitable,” Neil Landau, screenwriter and author of “TV Outside the Box,” said of the Hulu takeover. “Bottom line: Of course Disney needs Hulu to shield its image from edgy, provocative content.”
It’s easy enough to see. Disney+ will host kid-friendly content, along with Marvel and “Star Wars.” ESPN+ is the company’s sports play. And Hulu will become the go-to spot for franchises like “Deadpool,” “Atlanta” and “American Horror Story.”
In addition to Disney’s own content plans for Hulu, it will hold on to NBCUniversal programming on the service — for now. NBCUniversal content wasn’t guaranteed to be on Hulu, especially with a new service eventually coming, but Comcast agreed to license NBC shows to Hulu for a minimum of three years.
That content — along with a minimum of $5.8 billion it will receive for its initial $2 billion investment in Hulu — will be essential to Comcast as it looks to build its own streaming service. Those plans are still in their infancy, but the company joins rivals like WarnerMedia, Apple and others in looking for its own slice of the streaming pie now dominated by Netflix.
Disney will also have the opportunity to take Hulu worldwide, which analysts predicted would be a major reason for the company to acquire the streamer outright — especially since minority partners like Comcast may be less inclined to invest in such a pricey venture.
Up to this point, Hulu’s international growth has been stifled by complex licensing agreements. There are a number quotas and restrictions overseas that make it hard for U.S. companies to launch streaming platforms in other countries without doing local partnerships or simply licensing content to established streamers in the country. That’s one reason that even Netflix has yet to crack China, which has some of the staunchest restrictions.
When talking specifically about rolling Disney+ out internationally, Iger said Tuesday that part of the company’s international plan would require adhering to country quotas and producing local content.
He also laid out a gradual plan for Hulu’s growth overseas. “We have plans to roll out Hulu internationally in a variety of different markets, but as we said on the investor day, we’re going to walk before we run,” Iger said. “We obviously have a lot on our plate right now launching Disney+ and continuing to grow ESPN+ — ultimately looking opportunistically about what we do internationally. But there will be a large presence for both Disney+ and Hulu internationally over time. This obviously makes it easier for us because we’ll control that element too and it won’t compete with any of our other owned businesses internationally.”
Investors embraced the approach, boosting Disney’s stock 1.3% on Tuesday to $133.20 per share and Comcast shares by 1.5% to $42.91.
Now, with Hulu firmly under his aegis, Iger now has an opportunity to see if his three-pronged streaming attack is enough to at least rattle Netflix.