Disney, Comcast Negotiations Over Hulu Sale Hit Snag as Talks Near Finish Line
A new report suggests that the two companies could be headed to court if they cannot resolve the impasse.
It felt as if the Hulu sale process had finally turned a corner in December, when Disney cut Comcast a check for $8.6 billion as an initial payment for Comcast’s 33% stake in the streamer. The two sides had turned over responsibility for reaching a final valuation to their chosen banks to see if Disney would owe Comcast more for its portion of Hulu, and could sit back and await their appraisals.
But banks for the two media conglomerates came back with vastly different ideas of Hulu’s total worth, and now a third company has been brought in to settle the matter. Now, an exclusive report from The Wall Street Journal says that negotiations have soured, and that the two sides could end up in court if the matter isn’t resolved soon.
Key Facts:
- Disney and Comcast have a “significant disagreement” over how the valuation process should go ahead.
- The banks hired by the two companies were more than $12 billion apart in their appraisals of Hulu.
- Disney has little leverage in the negotiations, as it has made it plain how important Hulu is to its streaming ambitions.
Disney has owned two-thirds of Hulu since 2019, when it added Fox’s portion of the streaming service to its own 33% share. That same year, Disney and Comcast agreed that the House of Mouse would buy out the last outstanding stake in the company by 2024. In that deal Disney and Comcast set Hulu’s minimum valuation at $27.5 billion, meaning that Disney would have to pay at least one-third of that price to get Comcast’s stake.
The complex sale process has continued through December, but WSJ reports that the two sides have a “significant disagreement” as to how it should move forward now. The disagreement has been enough to throw talks into chaos, despite the fact that an independent appraiser is now trying to determine Hulu’s worth.
That has been the case since early May, when Disney’s bank JPMorgan pegged Hulu’s total worth near the $27.5 billion floor agreed to in 2019. At the same time, Comcast’s bank Morgan Stanley came back with an appraisal closer to $40 billion, which triggered the involvement of an independent third party, RBC Capital.
Per the terms of the sale agreement struck last fall, if RBC’s appraisal of Hulu comes in closer to JPMorgan’s evaluation on behalf of Disney, the average of those two valuations will be the final price for Hulu. Similarly, if the new bank’s valuation of Hulu is closer to Morgan Stanley’s number, those two figures will be averaged to determine Hulu’s value.
Who Has the Upper Hand in Hulu Negotiations?
It wasn’t immediately clear exactly what the behind-the-scenes rupture between Disney and Comcast was, but WSJ reports the two sides could end up in court if they don’t smooth things out quickly. When examining the situation, however, in my view Disney doesn’t have a lot of leverage if it wants to try and pry concessions out of Comcast.
That’s because Disney has already made it clear how important Hulu is to its future streaming ambitions. Company CEO Bob Iger has said he expects his streaming segment to be showing a regular profit by the end of 2024, and Hulu is central to those plans. Hulu content has been available on Disney+ since late 2023, but the official Hulu on Disney+ one-app experience launched in March, in a move Iger has said was primarily intended to help boost engagement and keep customers subscribed to the company’s streamers.
Comcast also has extra incentive to collect an extra check from Disney, if reports regarding its NBA dreams are accurate. Comcast is pursuing a mega-deal with the NBA that would see it pay the league $2.5 billion per season or more over the next decade for a package of the Association’s national broadcasting rights. The company could surely use the extra money, especially since its streaming service Peacock has nowhere near the number of customers that Disney’s streamers have. At last report, Peacock had 34 million subscribers, whereas Disney+ claimed 153.6 million at last count.
Disney and Comcast both have crack legal teams, but Disney would likely rather avoid another court battle. Its lawyers are already hard at work grappling with an anti-trust lawsuit leveled by Fubo against Venu Sports, the joint venture streaming service Disney has combined with Fox and Warner Bros. Discovery to create. But if it can’t come to an accord with Comcast over finalizing the sale of Hulu once and for all, the two sides could well end up in front of a judge.
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