The Walt Disney Company, which currently owns two-thirds of Hulu, is buying the remaining third from Comcast’s NBCUniversal to “further [its] streaming objectives.”
Disney’s announcement Wednesday said it’s expecting to pay “approximately” $8.61 billion for the remaining 33 percent stake in Hulu. That figure is based on a 2019 valuation of Hulu, pegging the streaming service’s value at $27.5 billion.
But Disney noted that it may pay more than $8.61 billion, pending an appraisal. Disney said it’s unsure how long the appraisal process will take but expects to complete the deal in 2024.
A deal years in the making
Disney has owned two-thirds of Hulu since it bought 21st Century Fox in 2019 for $71 billion. Comcast also made a bid for the business.
That same year, Comcast and Disney entered an agreement that enabled either party to force the sale of Comcast’s piece of Hulu, starting in January 2024. But the companies announced on September 6 that they were moving up that timeline, so this week’s news was expected.
When the companies announced moving up the sales process, Brian Roberts, Comcast CEO, noted that the appraisal procedure would “take a little time … to play out.”
What’s Hulu worth?
Disney sounds prepared to pay nearly $9 billion for Hulu, if not more, but there’s reasonable debate over how much the streaming service is worth. Hulu’s minimum valuation was set in 2019 when the streaming landscape looked very different.
Of course, Comcast only thinks Hulu has gained value.
“[$27.5 billion] was just a hypothetical that we picked five years ago because Disney had control of the company. The company is way more valuable today than it was then,” Comcast CEO Brian Roberts said in September, as per Deadline.
In September, Steven Cahall, a Wells Fargo analyst, valued Hulu at $30 billion, via a research note, Bloomberg reported.
But the streaming industry’s challenges can’t be overlooked. Streaming services are struggling with a lack of growth and growing competition, turning to practices like password crackdowns, ad-tiers, and price hikes to drive revenue.
Disney has said Hulu has been profitable some quarters, but anonymous “industry executives” cited in an April report from The Information said they thought Hulu was worth less than its 2019 valuation.
The April report also cited “three people with knowledge of the matter,” who claimed that “accounting rules allow entertainment companies to report content costs on their profit statements over a period of years, which is why a service can report a profit even if it is burning cash. And as of last year, Hulu’s content, technology, and personnel costs outweighed the revenue it generates,” The Information said.
As of July 1, Hulu was said to have 48.3 million subscribers. In May, Disney+ said it had 146.1 million subscribers, but that was after it lost 11.7 million subscribers in Q2 2023. That same quarter, Disney’s streaming service losses were $512 million.
As it stands, though, Disney appears to be committed to the minimum price set in 2019.
What does a future with a Disney-owned Hulu look like?
Considering that Disney already owned most of Hulu, the change shouldn’t be immediately overwhelming.
One potential concern, though, relates to content availability. Comcast promised to provide Hulu with NBCUniversal content until the end of 2024. This deal could continue post-sale, but it’s not a given. None of the companies have alluded to this, but if Hulu is somehow deemed less worthy than what Disney’s going to pay for it, Disney could extract further value through some sort of favorable licensing deal with Comcast.
Disney already said it plans on releasing an app combining Disney+ and Hulu. Assuming the deal is completed, we expect more fluid interconnectivity between the two services.
On the business side, Disney may see more ad revenue. Seventy percent of Hulu’s subscribers use ads, The Information reported in April, citing an anonymous person “familiar with the figures.” Hulu’s user base may be accustomed to streaming ads since the service originally launched with commercials.
Critically, Disney’s financial statements show that Hulu’s average revenue per user is more than double what Disney+ sees, The Information noted. Under one umbrella, Disney can explore ways to sell ads across Disney+ and Hulu.
Comcast is looking to enhance shareholder returns and buy back stocks, per Deadline. Meanwhile, it still has its Peacock streaming service to try to attract the same sort of user base it had with Hulu.
