Disney to pay at least $8.6 billion for Comcast’s Hulu stake
The Walt Disney Co. is proceeding with its buyout of Comcast Corp.’s stake in streaming service Hulu — a major step in the Burbank entertainment giant’s pivot to streaming.
The move was expected.
Months ago, Comcast Chief Executive Brian Roberts signaled that the Philadelphia cable giant was planning to divest its 33% interest in the service, and in September, the two companies announced they had expedited the timetable for Disney to complete the buyout.
Disney confirmed the move Wednesday, which marked the first day of a scheduled appraisal process to ultimately set a value for Hulu.
“The acquisition of Comcast’s stake in Hulu at fair market value will further Disney’s streaming objectives,” Disney said in a statement, noting that it expects to pay Comcast’s entertainment company, NBCUniversal, about $8.61 billion for its stake in the popular service, which offers such acclaimed fare as “The Bear,” “The Handmaid’s Tale” and “Only Murders in the Building.”
However, Disney may end up paying considerably more than $8.6 billion.
Both Disney and Comcast have hired investment banking firms to come up with separate appraisals to determine the “fair market value” for the service, which has about 48 million subscribers.
If the two firms reach substantially different conclusions, a third appraiser will be hired to come up with the valuation, according to regulatory filings.
That process is expected to take several months. Disney, in its statement, said the appraisal process likely will stretch into 2024.
Streaming services including Netflix, Disney+ and Apple TV+ have increased their prices, as subscriber growth has slowed from the early days of the COVID-19 pandemic.
Disney gained the majority stake in Hulu as part of its April 2019 acquisition of much of Rupert Murdoch’s 21st Century Fox. The following month, Disney and Comcast negotiated a pact that outlined the governance of the service while it was jointly owned by the two companies and also provided a blueprint to dissolve their partnership.
At the time, the two sides agreed that Hulu would be valued at no less than $27.5 billion, making Comcast’s stake worth $8.6 billion.
But Roberts has stressed that Hulu is a unique asset that, in Comcast’s view, is worth considerably more. Analysts have speculated that Hulu might be worth as much as $60 billion — more than twice the amount envisioned four years ago.
“We look forward to the appraisal process and the determination of Hulu’s fair market value which we expect will reflect the extraordinary value of the business,” Comcast said in a Wednesday statement.
Earlier this year, Disney Chief Executive Bob Iger sounded a downbeat note about Hulu, saying he wanted to turn the company’s focus away from “undifferentiated” general entertainment content. He hinted that the service might be among the assets that Disney was willing to part with.
Since then, the company has taken steps to unwind Comcast’s interest in order to own 100% of the service. Full ownership is an important step, should Disney ultimately fold Hulu’s offerings into Disney+.
Disney has extra cash on hand to buy out Comcast’s stake in Hulu. As of June 30, Disney had $11.3 billion in cash on its balance sheet.
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Hulu launched in 2007 as a joint venture between NBCUniversal, Fox and Providence Equity Partners. Disney joined the ownership group two years later. For years, the media companies wrestled among themselves over how to best grow the streaming service without undermining their linear TV networks businesses.
When Disney paid $71 billion for the Fox assets in 2019, Fox’s Hulu stake was part of the deal. The transaction brought Disney’s stake to 67%.
At the time, Hulu was seen as a centerpiece of the Burbank company’s streaming strategy. Disney initially approached its Disney+ service as a leading vehicle for family entertainment. It decided to migrate the more adult-oriented fare, including shows from the FX television channel, to Hulu.
Meanwhile, Comcast is shifting its focus to its wholly owned Peacock, which company executives have said would lose about $2.8 billion in 2023. In the third quarter, the streaming service gained 4 million paying customers, bringing its total to 28 million, Comcast reported last week.
Peacock generated $830 million in revenue, which represented a 64% increase from the same period a year earlier.
NBC content is now being steered to Peacock, instead of Hulu.
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