Breaking: Disney Set to Purchase Remaining 33% of Hulu from Comcast for at Least $8.6 Billion
Since Disney officially purchased the bulk of 21st Century Fox’s entertainment assets in 2019, it was an eventuality that the company would end up owning all of Hulu, and we now know how much it is going to cost them. On Wednesday, Disney announced that it would be purchasing the remaining 33% of the general entertainment streaming service from Comcast for a minimum of $8.61 billion.
- Hulu was created by Comcast, Disney, and Fox, so when Disney purchased Fox’s assets, it became the majority owner of Hulu.
- The deal allowed Comcast to force Disney to buy the remaining 1/3 of the platform, or for Disney to force Comcast to sell the remaining 1/3 beginning on Nov. 1.
- It is anticipated that Disney will eventually merge Hulu and Disney+ into a single streaming service.
Why Can Comcast Force Disney to Buy the Remaining Share of Hulu?
The complicated contractual agreement that was agreed upon when Disney took over majority ownership of the streamer says that Disney has the right to buy Comcast out of Hulu, or that Comcast has the right to force Disney to buy it out as early as 2024 in what is known as a put/call arrangement. However, in September, the two media companies agreed to move up the bargaining window so that the sale could be initiated beginning on Nov. 1.
In 2019, the two companies agreed that the minimum value for Hulu would $27.5 billion for the purpose of this put/call agreement, meaning that to own the streamer completely, Disney would need to pay Comcast at least $9.17B. The reason that the payment price is under that total is due to “anticipated outstanding capital call contributions payable by NBCU to Disney.”
During the negotiations, the two sides were unable to agree upon a valuation, so they turned to a pair of investment bankers to mediate the situation and help determine a fair market value for the third of Hulu.
This part of the process was also part of the 2019 contract between the two and Comcast has retained Morgan Stanley for the job and Disney has brought in JPMorgan Chase. The two financial experts will comb through data and documents to determine what Hulu was worth on Sept. 30, 2023. That part of the process is still ongoing, but apparently, it appears that Disney is confident enough that the valuation will be on the lower end of the spectrum that it is moving forward without the final details.
In the company’s statement, Disney said, “If the value is ultimately determined to be greater than the guaranteed floor value, Disney will pay NBCU its percentage of the difference between the equity fair value and the guaranteed floor value.”
The timetable for the full evaluation is unknown, but Disney believes that it will be wrapped up in 2024.
What Will Disney Do With Hulu Once It Completely Owns It?
It has long been assumed that upon officially controlling the entirety of Hulu, Disney would move to merge the two streaming services in an effort to strengthen its goal of putting streaming at the center of its home entertainment portfolio. In its statement on Wednesday, Disney said, “The acquisition of Comcast’s stake in Hulu at fair market value will further Disney’s streaming objectives.”
In May 2023, Disney CEO Bob Iger announced that before the end of the year, the company would launch a one-app experience for Disney+ and Hulu. This was never anticipated to be a complete merger of the two platforms, but instead would likely allow users to easily move between the two services without having to exit one and then go through the process of logging into the other in order to move between titles.
Last month, it was reported that this new integration was on schedule to launch before the end of 2023, but it would do so without some key features. The current version of the project will see a Hulu tile appear on Disney+ that has selected Hulu titles, but not nearly all of the shows and movies available on the full version of the service.
However, this one-app experience is believed to simply be a stepping stone to the eventual merger of the services, much like Warner Bros. Discovery did with its disparate streamers discovery+ and HBO Max into the combined Max and what Paramount Global is currently doing by sunsetting the SHOWTIME streaming service and moving it to the premium tier of Paramount+, consolidation is a central focus of the streaming industry as everyone is looking to make their offerings as indispensable to consumers as possible to retain as many paying customers as possible.
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