Analyst: Is Disney Making Moves to Sell Hulu, ESPN?

The winds of change are currently at gale force across the streaming industry. Services are absorbing sibling networks, others are launching ad-supported tiers, companies are licensing their content to third parties, and shows and movies are being removed from platforms industry-wide, all in the name of cutting costs and boosting revenues.

Disney is the latest company to feel the winds of change blowing. The company is reportedly exploring licensing some shows and movies to other media outlets in order to enhance its revenue and bring down mounting streaming losses. But some industry analysts believe that this move could simply be the first step toward bigger changes to come for the Disney streamers Disney+, Hulu, and ESPN+.

Richard Greenfield, Brandon Ross, and Mark Kelly of the technology, media, and telecommunications research firm Lightshed Partners speculated recently that Disney’s exploration of content licensing could be the first step toward the company selling Hulu and spinning off ESPN.

The trio’s logic is financially based. Disney currently owns 67% of Hulu, after acquiring one-third of the company in its purchase of most of FOX’s assets in 2019. Disney already owned a third of Hulu before the FOX acquisition, and the final third is currently owned by Comcast. Thanks to contractual terms, if Disney decides to buy the rest of Hulu from Comcast before 2024, Comcast must sell.

However, to date, the two sides have not been able to reach an amicable agreement over the price of Comcast’s stake in Hulu. Comcast CEO Brian Roberts has stated on multiple occasions that if that portion of Hulu were put up for auction, it would fetch an even higher price than the $27 billion minimum valuation that the initial contract put on it.

Lightshed notes that if Disney were to sell its portion of Hulu instead, it would be recouping $50+ billion instead of having to shell out even more. The move would also allow current Disney CEO Bob Iger to stay true to his vision of Disney+ as a home for family-oriented entertainment, as more adult programming has generally been steered toward Hulu. This would allow Disney to adjust its streaming focus to what it does best while also padding its bottom line, which saw a $1.5 billion loss in the most recent earnings report.

Hulu’s content library would be immediately attractive to companies like Netflix or Amazon that could afford to pay the necessarily high cost of acquiring it, although Comcast would be the most obvious partner, as the cable and broadband company already owns 33% of the streamer. Between original series like “The Dropout” and “Dropsick” and hit shows from FX like “The Bear” and “What We Do in the Shadows,” there is plenty on Hulu for other companies to get excited about, but it might prove difficult for Disney to find a partner with deep enough pockets to afford such an acquisition in this market.

If Disney were able to unload Hulu, would ESPN be next? There’s no denying the popularity of live sports on pay TV, but paying for sports broadcasting rights is an expensive proposition. If Disney were to unload ESPN as well, it could bank another hefty cash infusion and remove a costly expense from its balance sheet. In 2022, investor Dan Loeb was vocal in his opinion that Disney should spin off ESPN as soon as possible, but with the diminishing returns of linear broadcasting, is there any company willing to make it worth Disney’s while to part with the worldwide leader of sports?

Such sales would not come without major questions. If Disney sold Hulu, what would happen to the integrated Disney+/Hulu service in Europe that operates under the “Star” brand? Would content from Disney-owned channels like ABC, FX, and Freeform still stream on the service? How would Disney Bundle customers be affected if the company dumped Hulu, ESPN+, or both?

The sales of Hulu and ESPN would mark seismic shifts in Disney’s corporate philosophy. But they would also bring in big chunks of quick revenue, and for a company with as many budgetary issues as Disney is currently suffering, that’s nothing to sneeze at. The company’s streaming losses of $1.5 billion in its most recent earnings report led in part to Iger being brought back to right the ship. In his previous tenure leading the company, Iger bought Pixar, Marvel, and Fox, this time around, his legacy might be in what he sells, instead of what he buys.