Comcast CEO expects Disney to buy remaining Hulu stake

The future of Hulu continues to be an open question Comcast and Disney have yet to agree on terms that will address future ownership of the company.

But Comcast executives are planning to buy Disney — even if they want otherwise.

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Disney owns 2/3 of Hulu and have the option to buy the remaining 33% from Comcast as early as January 2024. Several industry analysts and watchers has speculated Comcast may be trying to buy Hulu from Disney, but not vice versa. Comcast CEO Brian Roberts is a longtime believer in Hulu and has historically pushed for assets to be kept rather than sold. including in 2013, when Roberts spoke to DirecTVaccording to people familiar with the matter.

Comcast floated the idea of ​​buying all of Hulu from Disney after Disney agreed to buy most of Fox’s assets as part of a $71 billion deal that ended in early 2019, the two people requested anonymity. said because discussions have taken place. private. Disney, armed with 66% ownership after acquiring Fox’s minority stake in Hulu, dismissed the idea, the people said.

Blocked from buying Hulu in its entirety, Comcast’s unwavering faith in the business led to the unusual deal the two companies reached in May 2019, with Comcast agreeing to sell Disney its minority stake. as early as 2024. As part of that transaction, Disney secured a minimum Hulu valuation of $27.5 billion to sell.

That amount had spiked earlier in the pandemic, leaving Comcast with some hope that Disney might choose to unload Hulu instead of paying Comcast a large chunk of the cost for the rest, two of them said. Offloading Hulu will allow Disney to focus and money primarily on Disney+.

“I think if Disney could turn back the clock today, I’m not sure they would be in that deal,” said Neil Begley, an analyst at Moody’s Investors Services. “Disney has this huge bill to pay in 2024 at a time when they’ve invested a lot of money in Disney+.”

Buying Hulu from Disney will also boost Comcast’s streaming efforts. Hulu would immediately become Comcast’s top streaming property, replacing NBCUniversal’s Peacock, which added just 13 million paid subscribers in its nearly two years of existence. Hulu has 46.2 million subscribers. Peacock may exist as NBCUniversal’s free ad-supported option. Peacock has got a free tier, with millions of users.

Some of Comcast’s top executives also argue that Hulu doesn’t make as much sense when paired with Disney properties as it does at NBCUniversal, especially with the recent announcement that Disney+ plans to roll out a support tier advertising support in December, according to people familiar with the matter. Hulu has been Disney’s ad-supported service for many years. Disney could have positioned Hulu as its promotional game going forward, but CEO Bob Chapek opted to do versions of both Disney+ and Hulu with and without ads.

Spokespersons for Disney and Comcast declined to comment.

Disney decided to lower Disney+’s Guide to 2024 and Its next move is bullish signaled to Wall Street that Chapek was no longer focused on adding subscribers at all costs.

It sent a signal to Comcast that Hulu was likely in Disney’s long-term plans. Excluding Hulu with Live TV, Hulu’s average revenue per user is $12.92 per month. That’s almost triple Disney+’s global ARPU of $4.35 and more than double Disney+’s ARPU in the US and Canada ($6.27).

Disney has built a streaming strategy around combining Disney+, Hulu, and ESPN+. While Disney raised the price of Disney+ by 38% and ESPN+ price up 43%, it just increased the price with Disney+, Hulu (with ads), and ESPN+ by $1, from $13.99 to $14.99. That suggests Disney’s most preferred choice is customers paying for the entire package, including Hulu.

In recent months, media and entertainment companies have begun to focus on building profitable subscribers, rather than just acquiring subscribers, as streaming growth across the industry continues to grow. slow down. If Disney doesn’t build on Disney+’s growth, Hulu will become a more important part of its long-term strategy.

“People are getting more and more cautious about their spending,” said Kevin Mayer, Disney’s former streaming chief. on CNBC last month. “There’s a new emphasis from Wall Street not only on the top subscriber count but also on the bottom line. I think that’s good.”

Comcast has taken steps to weaken Hulu, assuming Disney will keep it. This early year, Comcast made the decision to remove content like “Saturday Night Live” and “The Voice” from the streaming service and put it on Peacock instead. That change comes later this month.

Comcast has set aside some of the money it will receive to pay off the debt. Comcast executives say they don’t need cash and are not independently looking to speed things up, two of them said.

Activist investor Dan Loeb’s Third Point Capital bought a new stake in Disney last month, arguing that Disney should not only close its deal for Hulu, but must speed up its time.

“We urge the company to make every effort to buy back Comcast’s remaining minority shares before the contract expires in early 2024,” said Loeb. said in a letter to Chapek. “We believe Disney will even have to pay a modest premium to expedite the integration but are aware that sellers may have unreasonable price expectations at this point (also note that the seller has made an early decision to remove content from the platform.) We know this is a priority for you and hope to reach an agreement before Comcast is contractually required to do so for approximately 18 months. “

Disney has not publicly addressed the specifics of Loeb’s claims and has not made a decision on whether it plans to speed up the purchase of Comcast’s stake in Hulu, according to people familiar with the matter. related to this issue.

Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.

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