Disney has struck a deal with Comcast to take over full control of Hulu, the companies announced Tuesday.
Hulu operations are in the sole hands of Disney effective immediately, and the entertainment giant can gain control of Comcast’s 33 percent ownership interest starting in 2024.
Under the agreement, by as early as January 2024 Comcast can sell NBCUniversal’s stake in Hulu to Disney for a minimum of $5.8 billion. Either Comcast can require Disney to purchase the interest or Disney can require Comcast to sell for fair market value at that point in the future.
Independent consultants will assess Hulu’s fair market value, but Disney has committed to a sale price that represents a minimum total equity value of Hulu of $27.5 billion in 2024, the companies said.
AT&T last month sold back its 9.5 percent stake in Hulu for $1.43 billion in a deal that valued the streaming video company at $15 billion. Under the new agreement, Disney and Comcast will fund that transaction pro rata to their current two-thirds/one-third ownership interests.
AT&T had acquired its share in Hulu through its purchase of Time Warner, while Disney scooped up 21st Century Fox’s stake when it bought Fox’s entertainment assets.
Comcast can, but is not obligated, to fund its proportionate share of Hulu’s capital needs going forward, but will be diluted if the cable giant opts not to fund. Only $1.5 billion of capital calls each year can be funded through equity investments. Even if Comcast does not fund its share of those equity capital calls, Disney has agreed Comcast’s ownership interest in Hulu won’t drop below 21 percent, resulting in the $5.8 billion price guarantee.
Disney is gaining control of Hulu as it readies to launch its Disney Plus streaming service this year, which is priced at $7 per month and joins Disney’s ESPN Plus service. Those two could be bundled with Hulu, which costs $6 per month for the base on-demand package and $45 per month for the version with live linear TV.
Recent research by Vanson Bourne, commissioned by Amdocs, found that while 64 percent of US consumers currently use at least two different subscription video services, 69 percent of consumers would prefer to pay for a single, all-inclusive bundle of content that featured all of their desired programming.
Comcast is also getting in on the direct-to-consumer game, with plans to launch an NBCUniversal streaming video service in 2020. Hulu currently licenses NBCU content and Comcast agreed to extend that arrangement as well as the carriage agreement with Hulu Live for NBCU channels until late 2024.
However, in one year NBCUniversal can put content that is currently exclusively licensed to Hulu on its own service, with Hulu paying a reduced license fee. NBCU can also opt to pull its content from Hulu in three years.